Meister has taken steps to reorganize the enforcement division. Lawyers were previously divided into several dozen small teams that were assigned cases. Now, he says, "the teams are formed around the cases," allowing greater efficiency and flexibility. He's also created two squads, one focusing on manipulation and disruptive trading and the other on swaps. And he's instituted a "case and policy committee" of the division's senior leaders that meets weekly to review all high-level decisions and "make sure we're being consistent."
It seems clear that agency lawyers have reaped the benefits of having so many cases in the pipeline. In 2010 a record 419 new investigations were opened—a feat promptly topped by the 450 investigations opened the following year. The number tapered off in 2012 to 350, still high by historical standards.
Meister says cases in the works will "absolutely" invoke the CFTC's new antifraud and antimanipulation authority under Dodd-Frank. Before the law was passed in 2010, CFTC lawyers had to prove that someone specifically intended to create an artificial commodity price. Now, it's enough to show that the accused's conduct was reckless. The new authority also covers the swaps markets, which were previously beyond the commission's jurisdiction.
A key goal, Meister says, is to bring "high-impact cases—cases involving a large number of victims, like Ponzi cases . . . or cases that influence market behavior, like the Barclays case." The London-based bank in June agreed to pay a record $200 million to settle CFTC charges that it manipulated its submissions to the Libor and Euribor benchmark interest rates used in global financial markets.
Indeed, the agency is going after the most powerful players in the financial world as never before. For example, JPMorgan Chase shelled out $20 million in April to settle charges that it unlawfully handled Lehman Brothers Inc.'s customer funds. Meister chastised the financial services giant in a press release, stating that commodity laws "impose critical restrictions on how financial institutions can treat customer funds, and prohibit these institutions from standing in the way of immediate withdrawal . . . whether the markets are calm or in crisis."
JPMorgan was also dinged in March, paying a $140,000 fine for confirming the execution of a prearranged trade involving 10-year U.S. Treasury notes. It was hit with another suit in September for exceeding speculative position limits in cotton futures (it settled for $600,000).
Goldman Sachs Execution and Clearing also faced CFTC enforcement, paying $7 million in March to settle charges that it failed to diligently supervise accounts. And Morgan Stanley in June settled CFTC charges for $5 million for making unlawful, noncompetitive trades.
Charles Mills, a partner at K&L Gates whose practice focuses on derivatives and securities enforcement and compliance, agreed that the CFTC has become more high-profile. "A lot of companies 10 years ago didn't even know what the CFTC was," he says. "Now they're paying attention."
A version of this story appeared in The National Law Journal, a sibling publication of Corporate Counsel.
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