‘Bad Actor’ Waivers Are Meant to Keep Banks Accountable, Not Help Them Settle Quickly

Feb. 5, 2018

‘Bad Actor’ Waivers Are Meant to Keep Banks Accountable, Not Help Them Settle Quickly

Public Citizen Calls for Removal of Bank Reps From Market Regulator’s Advisory Board

WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) should remove Advisory Committee members representing financial institutions that have violated the commission’s own rules, Public Citizen said today.

Public Citizen’s Energy Program Director Tyson Slocum protested the CFTC’s decision to waive “bad actor” provisions for Deutsche Bank, HSBC and UBS as part of a commodity market manipulation settlement proceeding. The provisions are meant to disqualify companies that have violated anti-fraud laws or regulations from certain securities offerings.

“If the Commission erroneously deems it proper to include bad actor waivers as part of a negotiation with financial institutions accused of misconduct, then the least the agency can do is remove any individuals representing such companies from any and all of the Commission’s Advisory Committees,” Slocum wrote in a letter to CFTC Chairman J. Christopher Giancarlo. “It is unseemly to allow representatives of companies involved in violations of the Commission’s rules to continue providing formal advice, counsel and access to the Commission through service on an Advisory Committee.”

A CFTC representative told the media that the commission included the waivers for the purpose of reaching “settlements with the banks more quickly. Otherwise … the banks would have wanted to apply for waivers from the bad actor rule before finalizing and announcing the settlement agreements.”

As Slocum noted in the letter, “The bad actor disqualification provisions are not part of federal law to be used as a bargaining chip to entice violators to settle with regulators more quickly. The bad actor provisions are critical tools of enforcement to hold violators accountable for their actions, to send a strong message of deterrence to other entities that might be contemplating breaking the law, and to protect consumers and investors from ‘bad actors’ that have a likelihood of committing future harm due to their misconduct.”

Folding such a waiver into the settlement itself also robs the public from being able to weigh in on the problems posed by the offending institutions.

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