CFTC thanks UK FCA for critical cooperation in age of cross-border trading

Rick Steves

The Commodity Futures Trading Commission has publicly thanked the UK Financial Conduct Authority for its critical cross-border cooperation to ensure the integrity of U.S. markets and markets abroad.

Specifically, the UK FCA obtained information from United Kingdom-based traders on behalf of the CFTC during an investigation of certain crude oil trading on a CFTC-regulated derivatives exchange.

International cooperation has become key to ensuring the integrity of the markets at a time where derivatives and securities transactions are increasingly cross-border in nature.

UK-based traders investigated for crude oil trades via US derivatives exchange

The CFTC announcement did not reveal which UK-based traders are under investigation for their crude oil trading nor which US derivatives exchange the transactions were processed.

The US regulator took the opportunity to remind market participants that it relies on the cooperation of its fellow domestic and foreign derivatives regulators to effectively investigate violations of the Commodity Exchange Act that involve cross-border conduct or misconduct by market participants located abroad.

In this particular case, the UK-based traders under investigation have challenged the UK FCA’s authority to obtain the records in assistance to the CFTC and took to a UK court, which refused their request to proceed with a judicial review of the UK FCA’s decision to assist the CFTC.

These traders then went to the Court of Appeal of England and Wales, which also favored the UK FCA’s role in the investigation. The matter is now settled and the information will passed on to the CFTC.

FCA and CFTC among 100 signatories of multi-lateral MoU for cooperation

Gretchen Lowe, Acting Director of the CFTC’s Division of Enforcement, commented: “In order to fulfill its mission of promoting the integrity, resilience, and vibrancy of the U.S. derivatives markets, the CFTC must be able to obtain information from individuals and entities who are trading on U.S. markets. U.S. derivative markets are available worldwide, and the Court of Appeal of England and Wales’ decision shows traders cannot hide from regulatory oversight just because they are overseas. The CFTC is grateful for the FCA’s efforts to secure this result and its commitment to cross-border enforcement cooperation.”

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA said: ‘We welcome today’s decision. The powers to seek information needed for investigations by the FCA, including where doing so is to assist a foreign regulator, are vitally important in ensuring investigations involving multiple jurisdictions are able to be conducted properly. The FCA will not permit subjects of international investigations who are located in the UK to hide behind unmeritorious claims or to delay international investigations through abuse of legitimate remedies.’

Under the Financial Services & Markets Act, 2000, the FCA is able to use its investigation powers to assist foreign regulators. The FCA also commonly seeks assistance from foreign regulators in relation to its own investigations.

Both the FCA and the CFTC are signatories to a multi-lateral memorandum of understanding which commits the signatories to provide relevant assistance to one another. There are over 100 signatories to this memorandum.

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