Today, the House Agriculture Subcommittee on General Farm Commodities and Risk Management held a hearing to review the implications of CFTC v. Zelener, a 2004 federal circuit court decision that impacted the Commodity Futures Trading Commission’s ability to protect consumers engaging in contracts in the foreign currency exchange (forex) market. Congressman Leonard Boswell of Iowa is Chairman of the Subcommittee.
The Subcommittee heard testimony from witnesses about the changes the Food, Conservation, and Energy Act of 2008 made to clarify the CFTC’s authority to police the forex markets and the potential implications the Zelener decision may still have for consumers.
“We must ensure that fraudulent activity is not taking place in the market place. If hard-working Americans are getting taken to the cleaners by shysters, we need to guarantee that federal regulators have the tools necessary to protect consumers," Chairman Boswell said. “The Subcommittee looks forward to hearing from market participants about additional ways to protect retail customers while ensuring legitimate market activity is not regulated out of business."
“After nearly a year since provisions in the 2008 Farm Bill restored CFTC jurisdiction over futures look-alike contracts in the retail foreign currency exchange markets, it is helpful for this Subcommittee to examine the effectiveness of that fix," said Subcommittee Ranking Member Jerry Moran. “In addition, it is useful for the Subcommittee to examine whether the fraud that was occurring in the retail foreign currency exchange markets has migrated into other commodity markets and whether it is necessary for this Subcommittee to consider further action to prevent such fraud."
The Zelener case dealt with the legality of certain foreign currency contracts sold to small investors, which is generally prohibited. The court decision held that these look-alike futures contracts were not futures and could be legally sold outside of the CFTC’s authority, opening the door to scam artists and boiler rooms to write and market contracts in foreign currencies as a means to defraud the public.
Now enacted into law, the Food, Conservation, and Energy Act of 2008 clarified the CFTC’s anti-fraud authority over forex transactions. In addition, the bill strengthened the qualifications and minimum capital requirements of forex dealers and required them to register with the CFTC.
The opening statements of all the witnesses are available on the Committee website at http://democrats-agriculture.house.gov/hearings/index.html. A full transcript of the hearing will be posted on the Committee website at a later date.
Witnesses:
Panel I
· Mr. Stephen J. Obie, Acting Director, Division on Enforcement, Commodity Futures Trading Commission, Washington, D.C. Panel II
· Mr. Daniel Roth, President and Chief Executive Officer, National Futures Association, Chicago, Illinois
· Mr. Philip A. Feigin, Attorney, Rothgerber Johnson & Lyons, on behalf of Monex Deposit Company, Denver, Colorado
http://democrats-agriculture.house.gov
Source: House Committee on Agriculture
