For the first time, the CFTC settled an insider trading case pursuant to CFTC Regulation 180.1 (“Rule 180.1”), promulgated under The Dodd Frank Act, resulting in a lifetime trading ban for the trader, a civil monetary penalty of $100,000 and a restitution payment of over $200,000.
Rule 180.1 enhances the CFTC’s ability to prosecute fraud in connection with any contract of sale of any commodity for future delivery. Notably the CFTC used the misappropriation theory, consistent with the SEC’s approach, to find that the trader traded on material non-public information, in breach of a pre-existing duty to his employer. According to the CFTC:
- The trader orchestrated fraudulent transactions between his personal accounts and his former employer’s proprietary accounts, enabling the trader to generate profits for himself and losses (or reduced profits) for the company.
- The trader held a “relationship of trust and confidence” with his employer and was privy to material non-public information including the timing, contracts, prices and volumes of its orders.
- The trader misappropriated material non-public information and “knowingly or recklessly” used his employer’s trading information to trade for his own benefit.