CFTC Commissioner Chilton on “Trimming” the Dodd-Frank Tree

CFTC Commissioner Bart Chilton delivered a speech addressing the regulation and recovery of the markets through the Dodd-Frank Act.  Topics covered include:

  • Dodd-Frank (i.e., the tree);
  • Transparency and Market Integrity (i.e., the stockings);
  • High-Frequency Traders (or Cheetahs);
  • Market Technology SNAFUs (situation normal, all fouled up);
  • Accountability;
  • Updating the Penalty Regime.

 

Lofchie Comment:  One of the assertions that Commissioner Chilton routinely makes in his speeches is that the fines which regulators can impose are too low.  In the current speech, he argues that the CFTC should be able to impose fines that are ten times higher per violation and, further, that each second in which a violation is ongoing might be deemed a separate violation.  In effect, he argues that regulators should have the authority to impose penalties which are so high that they can drive firms out of business at any time.
       Should regulators really have that much power?  Certainly, the question that Commissioner Chilton raises is not a trivial one.  He asserts that the regulators have so little enforcement power that wrongdoers are not afraid of them.  (Given my personal experience, I don’t agree with this; I think firms are quite fearful of the regulators.)  My concern is somewhat the opposite: that, in certain respects, the power of the regulators is so great that it prevents an effective challenge to their disciplinary authority.  After all, if a firm loses a challenge to an enforcement action, it is potentially out of business; if it wins, it has received a lot of bad publicity along the way and angered its regulator (not quite three strikes, but getting there). 
       Anyway, whether or not one agrees with Commissioner Chilton, the issue that he raises is an important one.

View speech in full here (links externally to CFTC website).