The CFTC has issued an interpretation that relates to anti-fraud authority provided in the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The interpretation is the CFTC’s view of the meaning of the term “actual delivery,” and guidance on how the CFTC will determine if the actual delivery exception applies to a transaction.

Section 742(a) of the Dodd-Frank Act amended the Commodity Exchange Act to add a new section, 2(c)(2)(D), entitled “Retail Commodity Transactions.” Section 2(c)(2)(D) broadly applies to any agreement, contract, or transaction in any commodity that is entered into with, or offered to, a non-eligible contract participant or non-eligible commercial entity on a leveraged, margined, or financed basis. The Section requires such agreements, contracts, and transactions to be conducted on a regulated exchange and subjects them to the CFTC’s anti-fraud authority. However, the Section does not apply if “actual delivery” of the commodity is made within 28 days. The CFTC issued the interpretation to explain its view of “actual delivery” and provide several examples of when “actual delivery” does and does not occur.

The CFTC anticipates it will use the interpretation to prosecute ponzi schemes and other frauds that are perpetrated in the retail commodities markets, such as scams by people acting as legitimate providers of investments in precious metals like gold and silver.

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