(Kitco News) – The Commodity Futures Trading Commission is wrapping up its investigation of the silver market and while some sort of public announcement may come “in the near future,” nothing is “imminent,” said CFTC Commissioner Bart Chilton Friday.
“We’re still wrapping it up. There’s nothing imminent, but I envision saying something publicly in the near future,” Chilton told reporters at the Hard Assets conference in Chicago.
It’s been four years since the CFTC announced in September 2008 that it was investigating the silver market for possible manipulation. It’s unusual for the government agency to announce publicly that there is an ongoing investigation.
Chilton reiterated at the conference that he believes that there was illegal activity, but did not say what that might be. He told reporters that he was frustrated the investigation has not ended yet.
Chilton said speculative position limits go into effect Oct. 12 to cap the number of trades a single speculative trader can have in place to 10% of a contract’s first 25,000 in open interest.
In his address to attendees at the Hard Assets conference, Chilton said the financial industry should have some sort of user fee imposed to fund the CFTC, which is currently funded via taxpayers. Given that the CFTC is now in charge of the swaps market, which is around $700 billion globally versus the $5 billion size of the futures market, Chilton said the agency needs to have more employees to oversee the industry and greater funding.
“We’re the only financial regulator not (to) have user fees, (we should) at least (have) an increase. I think it’s time we have a user fee. Bush called for it, Obama’s called for it,” Chilton said, adding that he is working with the Office of Budget Management to come up with a potential user fee. “That’s still a ways away.”
Chilton said after the financial crisis that there needs to be a change in business culture. “We can’t regulate business ethos or morality. We can’t change business ethics… but what we need is a business cultural shift and we need to have this conversation,” he said.
He said he would “make suggestions” of what needs to be addressed to change the business culture, including reviewing the compensation structure in business where short-term winnings are rewarded, rather than longer-term thinking. “It rewards the trader that makes the big kills and not the risk manager,” he said.
That change in culture should also come with hiring, he said, both in the companies and on the corporate board level.
Chilton said the CFTC is going to propose that 35% of boards include public directors to get a diversity of views on the board. Additionally, the nominating committee should be comprised of 51% independent directors.
Regarding the bankruptcies of MF Global and Peregrine Financial, Chilton said he is promoting an insurance fund, similar to the Securities Investor Protection Corp., which protects investors in the securities industry. “It’s totally unfair that people in the securities industry have this, but not in the futures industry,” he said.
Russ Wassendorf Sr., the head of Peregrine, has pleaded guilty to fraud and is due for sentencing, but so far no one at MF Global has been charged with any possible fraud. Chilton said “it ain’t over until it’s over,” in regards to MF Global’s segregated funds being taken illegally. “It takes time to present a case.”
He spoke at length about the financial crisis and listed several banks which have received fines for various reasons. He expressed his own frustration at the size of the fines and the fact that no one has been imprisoned. "How come no one's in jail for wrecking the economy? It wasn't against the law,” Chilton said.
By Debbie Carlson of Kitco News dcarlson@kitco.com
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