The House of Representatives' Agriculture Committee proposed a bill to reauthorize the Commodity Futures Trading Commission through fiscal year 2025 that includes a material expansion of potential aiding and abetting liability. Currently, under relevant law, any persons who willfully aids and abets a violation of law can be held liable for such violation as a principal (Click here to access 7 U.S.C. § 13c(a)). As proposed by the Agriculture Committee, any person who recklessly provides substantial assistance to such a violation could also be liable as a principal.
Additionally, the proposed reauthorization bill would (1) amend core principles for contract markets and swap execution facilities to require the CFTC to adopt rules detailing trader data and other information such trading venues must be able to access from cash markets and other data sources related to contracts referencing digital commodities and (2) expand the reach of the CFTC’s enforcement authority outside the United States to circumstances where certain prohibited activities (e.g., fraud and manipulation) “have or would have a reasonably foreseeable substantial effect within the United States.”
As proposed, the CFTC would also be required to adopt policies to safeguard proprietary information it receives whether through investigations or otherwise proportionate to the “level of sensibility of the information” and limit access to the information to “appropriate” Commission staff.
My View: In light of the CFTC’s relentless prosecution of Jitesh Thakkar for developing software used by Flash Crash Spoofer Navinder Sarao despite the dropping of parallel criminal charges by the Department of Justice, the proposed expansion of potential aiding and abetting liability for non-registrants is a significant red flag. Potentially holding programmers of futures trading, advisory or surveillance systems liable for the non-intentional development of software that might be used for illicit purposes could have a material chilling effect on software development for legitimate purposes and inhibit US leadership in creating new fintech innovations for the derivatives industry. (Click here for background regarding the CFTC’s pursuit of Mr. Thakkar in the article “Department of Justice Declines to Retry Alleged Programmer for Flash Crash Spoofer” in the April 28, 2019, edition of Bridging the Week.)