Wall Street firms will soon face stiffer penalties for running afoul of US derivatives rules and more often admit their misconduct when settling with the Commodity Futures Trading Commission.
When US regulators, including the CFTC, agree to resolve cases, financial companies are often allowed to pay fines while not admitting to the government’s allegations. But the commission’s top enforcement attorney, Ian McGinley, said Tuesday that the watchdog will start taking a tougher stance in negotiations.
“For many years, the CFTC — and many other agencies — have resolved most matters on a no-admit, no-deny basis,” McGinley said in prepared remarks for a Tuesday speech in New York. “In negotiations, respondents should no longer assume that no-admit, no-deny resolutions are the default.”
Companies should also expect to pay higher fines and it will be more likely they have to hire people to monitor their conduct after a settlement, said McGinley, who started as the head of the agency’s enforcement division in February.
Democratic Commissioners Christy Goldsmith Romero and Kristin Johnson have recently called for the agency to bolster penalties. A majority of the agency’s five commissioners must vote to approve settlements.
Goldsmith Romero also asked the CFTC to reduce its reliance on agreements where a firm doesn’t admit to misconduct, and to seek harsher penalties for firms that repeatedly are accused of breaking rules.
In one recent instance, Goldman Sachs Group Inc. settled two CFTC enforcement cases on Sept. 29, without admitting or deny the allegations in either.
Read More: CFTC Fines Goldman Over Swaps Reporting, Futures Controls
“Recidivism has gotten worse in regulated financial services,” Goldsmith Romero said in a separate statement on Tuesday, which like McGinley’s didn’t mention any specific firms or settlements. “In these situations, it is critical for the CFTC to send a message to senior leadership to fix that culture, through heightened penalties, defendant admissions, undertakings, and in some cases a monitor.”
