Page 6 - White-Collar Crime
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S6 | MONDAY, FEBRUARY 8, 2016 | WHITE-COLLAR CRIME | NYLJ.COM
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CFTC Enters the Insider Trading
Enforcement
Arena
propriation theory of insider trading liability promote lawful “insider trading.” There is no companies holding material corporate infor-
BY DAVID MEISTER
for the irst time in the agency’s history. This general obligation for a farmer to disclose to mation traded in breach of duties owed to
AND CHAD E. SILVERMAN
action demonstrates the CFTC’s willingness to futures traders material information about his their employers.
enter a territory previously held exclusively crops before he trades on that information. Also for many years, certain market
Since the passage of the Dodd-Frank by securities regulators, albeit at a time when On the other hand, the securities markets, voices have urged the CFTC to more aggres-
Act, the Commodity Futures Trading shifts in the legal landscape have narrowed which are used for capital formation, exalt sively police insider trading. For example,
Commission has stepped up its pro- what constitutes culpable insider trading in principles of disclosure. Securities investors Congress, in the early 1990s, attempted
ile on the inancial regulatory landscape. the securities arena, a narrowing that surely own shares in companies that are obligated to to pass a bill to prohibit employees from
Dodd-Frank not only expanded the CFTC’s will impact the CFTC as well. The history of regularly disclose accurate information about personally using nonpublic information
jurisdiction by handing it the multi-hundred CFTC insider trading enforcement and what how the company is doing; corporate insid- about their employers’ cash market posi-
trillion dollar swaps market to regulate, it the future may hold follows.
ers are forbidden from trading on material tions.4 However, perhaps wary that futures
also enlarged the agency’s enforcement tool In the past, the CFTC was a reluctant actor information unless they irst disclose that market insider trading prosecutions might
box by, among other things, enacting force- in insider trading enforcement. After all, the information.2
erode the fundamental futures market prin-
ful anti-fraud legislation. On Dec. 2, 2015, the futures markets were founded in part upon For many years, the Commodity Exchange ciple that one should be able to hedge
CFTC used that new tool to charge the misap-
the notion that the nation’s producers—such Act’s (CEA) primary prohibition against insid- based on one’s own inside information
as farmers and ranchers—should have a er trading applied solely to insiders of the (think farmer and his crops), the CFTC
regulated platform to trade on their own Commission, registered futures exchanges opposed this theory of liability, noting
DAVID MEISTER is a partner at Skadden, Arps, Slate, “inside” information concerning their crops and registered futures associations, and their that while “employees should not misuse
Meagher & Flom and head of its government enforce- and herds, to hedge their risks and lock in tippees.3 This prohibition did not reach cer- their irms’ information for personal gain”
ment and white-collar crime group. CHAD E. SILVER- prices.1 In other words, the futures (and other tain forms of misappropriation-based insider in the futures or options markets, “more
MAN is counsel in the group.
derivatives) markets exist, at least in part, to
trading, such as where employees of private
information regarding the nature and mag-
