The SEC and CFTC are the two main regulators of the securities and commodities futures industries in the United States. The SEC regulates stocks and bonds, while the CFTC regulates commodities futures. There are numerous regulations that require broker-dealers and others who underwrite and deal in securities to follow licensing requirements, disclosure rules, and all of the SEC's regulations and the laws enforced by it. The CFTC enforces the Commodity Exchange Act (CEA), which is a federal law that prohibits fraud, manipulation, false reporting, wash sales, and other abusive practices in connection with transactions in commodity futures contracts.
The Securities and Exchange Commission
The Securities and Exchange Commission (SEC) is a federal agency that oversees the securities industry in the United States. The SEC's primary mission is to protect investors and ensure that the markets are fair and efficient.
The SEC enforces a variety of laws and regulations relating to securities, including:
The Securities Act of 1933
The Securities Exchange Act of 1934
The Investment Advisers Act of 1940
The Investment Company Act of 1940
The Sarbanes-Oxley Act of 2002
The Securities Act of 1933 requires that all offers and sales of securities be registered with the SEC. The Securities Exchange Act of 1934 regulates secondary trading in securities, and created the SEC as well as self-regulatory organizations like FINRA. The Sarbanes-Oxley Act is a federal law that was enacted in response to corporate accounting scandals and requires public companies to maintain accurate financial records.
The SEC is responsible for enforcing the federal securities laws that require companies to disclose important information to investors so they can make informed investment decisions.
The SEC also oversees the operations of stock exchanges and other markets where securities are traded, and it works to ensure that investors have fair and orderly markets in which to invest. Finally, the SEC regularly issues investor alerts about potential scams and frauds so that investors can protect themselves from financial harm.
The SEC also oversees the operations of stock exchanges and other self-regulatory organizations (SROs), regulates “penny stocks” and other securities, requires companies to disclose their financial condition and material events through Forms 10-K, 10-Q and 8-K filings with the SEC, prohibits insider trading, and enforces anti-fraud provisions.
There are a few types of securities law violations that the SEC commonly goes after. One type of violation is insider trading, which is when someone uses non-public information to make trades for their own personal gain. Another type is fraud, which can come in many forms like misrepresenting information about a security or cooking the books to make it look like a company is doing better than it actually is.
The Commodity Futures Trading Commission
The Commodity Futures Trading Commission (CFTC) is a financial regulatory agency with the authority to regulate the commodity futures and options markets. The CFTC was created in 1974 as an independent agency of the United States government.
The CFTC has a number of responsibilities, including:
Regulating the commodity futures and options markets
Overseeing the clearing and settlement of commodity futures and options contracts
Investigating possible manipulation of commodity futures and options prices
Preserving market integrity
Enforcing compliance with federal laws governing commodity futures and options trading
The CFTC has broad jurisdiction over a wide range of activities, including regulating:
The trading of commodity futures and options on designated contract markets (DCMs)
The marketing of commodity futures and options to the public
The registration of commodity pool operators and traders, as well as clearinghouses
The execution of customer orders on DCMs
Large trader reporting
The CFTC has a range of powers to police the markets it oversees. These include the authority to investigate possible violations of the Commodity Exchange Act and other statutes, bring civil enforcement actions, issue subpoenas, compel testimony, and seek injunctions against wrongdoers.
The CFTC also works closely with criminal law enforcement agencies on investigations that have a potential criminal component. The CFTC regularly refers cases to criminal authorities for potential prosecution. Finally, the CFTC partners with foreign regulators to promote fair and orderly global markets.
Some of the most common types of violations of the CEA include: insider trading, front-running, spoofing, and wash sales. Insider trading is illegal under the CEA and can be prosecuted criminally. Front-running is when a broker executes a trade on behalf of a customer while at the same time placing an order for his or her own account in anticipation of the price movement that will result from the execution of the customer's order. Spoofing is when a trader places an order with the intention of cancelling it before it is executed, in order to create artificial price movement to benefit their own position. Wash sales are prohibited under the CEA and occur when a trader buys or sells a commodity futures contract and then immediately offset that position with an equal and opposite transaction.
How Whistleblowers can Expose Those who Violate SEC or CFTC Rules
Whistleblowers can help expose those financial companies and registered (FINRA or NFA) individuals who are violating the law and potentially earn an award. The SEC's Office of the Whistleblower administers the SEC Whistleblower Program, which was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Under the program, eligible whistleblowers who provide original information about a securities law violation that leads to a successful enforcement action can receive an award of between ten and thirty percent of the money recovered by the SEC.
To qualify for an award, whistleblowers must submit information to the SEC using a Form TCR (Tip, Complaint or Referral). The information submitted must be true and credible, and must lead to a successful enforcement action with sanctions of over $1,000,000.
For complaints involving commodities futures violations, information must be submitted to the CFTC. Whistleblowers are encouraged to report information to the Commodity Futures Trading Commission (CFTC) in order to receive a reward. The CFTC is committed to protecting whistleblowers and ensuring that they receive the maximum possible reward for their information.
If you have information about a securities or commodities futures law violation, you may be eligible for an award. Contact us at Whistleblowers International to see if your information about laws enforced by the SEC or CFTC being violated qualifies you for a potential award.