Regulation Emancipation: How Fining Barclays Created New Support for Increased CFTC Capability

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The New York Times‘s Dealbook section last week reports that the Commodity Futures Trading Commission has fined financial services giant Barclays $200 million, effective June 27th, as a result of the company’s attempts to manipulate a key interest rate – the London Interbank Offered Rate, or “Libor”. To learn more about defining market manipulation and its effect on consumer investment, visit the Investors section of our firm’s website.

In a follow up to this news, the July 3rd edition of the Wall Street Journal reports that Barclays CEO Robert Diamond has apologized for the scandal in a letter to employees, pledging to implement new controls to prevent such incidents in future. While company chairman Marcus Agius has resigned in the alleged manipulation’s wake, Diamond is said to have no intentions of doing the same. Investigations into potential manipulation by Barclays and other banks have British officials debating how to set Libor rate, and how to deter these supposed corrupt practices.

This proverbial reeling in of a big fish has caused CFTC supporters on Washington – among them members of the Obama administration and Congressional Democrats – to bring attention to the commission’s value as surveyors of the financial industry, and to propose a CFTC budget increase. U.S. regulators are said to have been impressed with what they deemed the “nature and value of Barclays’ cooperation has exceeded what other entities have provided in the course of this investigation.”

When combined with citations against Justice Department and London regulators pertaining to Barclays’ actions, the fine totals $453 million and is purported to be the biggest in the commission’s history. That $453 million sum is apparently far greater than the commission’s current annual budget. After receiving $205 million from Congress for 2012, Republicans moved to decrease the CFTC’s budget by 14 percent, to $180 million. This decrease has come on the verge of ramped up enforcement from the commission: the CFTC has brought 99 actions in 2012, having brought only 25 in the previous fiscal year.

The result of Barclays’ prompt payment of the fine is twofold. It was proposed in the Journal’s coverage that executives considered payment to be a swift resolution that would comfort investors and remedy concerns as quickly as possible. Yet the Journal also suggests that many investors are concerned by the high cost of the settlement, and the release of emails in which Barclays traders are alleged to have explicitly detailed attempts at interest rate manipulation.

Much of this newfound proactive streak stems from the Dodd-Frank Act of changes to regulation, which granted the CFTC new capabilities to bring investigations and penalties to those who have broken financial laws. Prior to Dodd-Frank, the agency monitored the less volatile futures market, and had little sway in regulation of the industry at large.

The CFTC’s specified accusation against Barclays focused on the British bank’s attempts to manipulate specified interest rates to their liking. These interest rates are vital to the determination of lending rates.

President Obama is seeking a $308 million budget for the agency. Even with that $120+ million increase, the agency would remain Wall Street’s smallest regulator. All money procured from CFTC fines goes not to maintenance of the commission, but instead comes directly to the Treasury Department.

For new and experienced investors alike, having the best possible intelligence and data motivating one’s investments is the difference between either making smart investments, or being led astray by those brokers who aim to deceive. For a free consultation on this matter and an array of others, contact the team of esteemed securities attorneys at Malecki Law. It is both your benefit and your legal right to have the accuracy of your securities data reviewed by legal professionals. We believe that our financial markets are only as strong as the consumers who make solid, informed investments that allow securities industry to flourish.