Commodities and futures refer to the majority of the largest and most-frequently traded world assets. These would be tangible commodities such as orange juice, oil, meat, copper, and wheat . . . things that regularly show up in our day-to-day lives.
There are additional categories of assets that are not tangible, such as financial and currency options that are not as simplistic. These, too, are part of the commodities and futures markets.
These markets are regulated by the CFTC (Commodities and Futures Trading Commission). Thus, companies that fall under the control of the CFTC umbrella are those that are active in liquid markets like hedge funds, brokers, exchange traders, and others.
What Is Commodities and Futures Fraud?
Those who violate the terms of the Commodity Exchange Act have committed commodities and futures fraud and have defrauded the government. As watchdogs against commodities and futures fraud, the Whistleblower Office was created.
Under the Dodd-Frank Act, awards are granted to those who provide information leading to the exposure of instances of commodities and futures fraud. Protections were also established for CFTC whistleblowers to ensure that employers could not retaliate against them.
The CFTC’s Responsibilities
The CFTC maintains the integrity of futures markets by facilitating fair competitiveness, efficiency, and integrity. They are also responsible for protecting participants in the market against manipulation, malicious trading, and fraudulent acts, as well as ensuring the cleaning process is honest and fair.
Since 2014, the CFTC has been in charge of watching over DCMs (designated contract markets). They monitor exchanges, clearing organizations, swap dealers, data repositories, operators within commodity pools, and other go-betweens. The CFTC must work in conjunction with other foreign regulators like the Financial Conduct Authority in the United Kingdom.
Areas of Potential Commodities Fraud
The areas that most often see instances of commodities fraud are those that involve the liquid markets: commodity pools, foreign currency, binary options, precious metals, and commodity trading networks that are sold online.
How Is the CFTC Funded?
Despite what many would assume, the CFTC does not have self-funding. While fees for CFTC transactions have been requested for years now, no official legislation has been passed to grant them. The government funding for the CFTC has not been consistent, as it has been cut numerous times and the CFTC had to abandon numerous cases as a result.
When it comes to understanding the nature of commodities and futures fraud, one has to understand the role of the CFTC. The CFTC’s aim is to facilitate a transparent, competitive, and financially stable market for trading. They want to protect the markets, the public, and individuals and their personal funds. Those who violate the terms of the Commodity Exchange Act are fostering a fraudulent market and are committing commodities and futures fraud.