CFTC Adopts New Anti-Manipulation and Anti-Fraud Rules

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On July 7, 2011, the Commodity Futures Trading Commission (“CFTC“) issued final rules under the new anti-manipulation and anti-fraud provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank“). The CFTC adopted new Rules 180.1 and 180.2 under Section 6(c) of the Commodity Exchange Act (“CEA“), as amended by Dodd-Frank. These rules broaden the scope of the existing prohibition on price manipulation by eliminating the requirement to show an artificial price and lowering scienter to recklessness for the use of a manipulative device to defraud, acts or attempts to defraud, and for false or misleading statements. The prior scienter requirement was specific intent. The rules introduce an expanded prohibition on false reporting and make it unlawful to provide “any false statement of material fact“ to the CFTC in any context. Finally, the CFTC preserves its current authority on the prohibition of price manipulation even in the absence of fraud. The final rules became effective on August 15, 2011 with respect to all transactions other than “swaps“ (including, but not limited to, futures contracts, options on futures contracts, transactions with retail customers in foreign currency and commodity transactions and most excluded and exempt commodities). The delay in the effective date of Dodd-Frank2 will postpone the effectiveness and applicability of the new anti manipulation and anti-fraud provisions and the rules recently published by the CFTC for many over-the-counter transactions until the effectiveness of the rule that defines the term “swap“.

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Published In: Administrative Agency Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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