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CFTC Commissioner Bart Chilton on the Commission’s lawsuit against PFGBest over the firm’s missing money.
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-- -- Cash respond directly to that is Bart Chilton commissioner of the CFTC to regulate -- agency.
-- PFT best over the missing funds earlier today commissioner thank you so much for coming on.
And being here with -- I mean let me start with Phil's question because he was sort of asking where's the regulator you're the regulator how did this happen.
Well in the wake of MF global you know there's been a spot check here but on all of these firms there's a 126.
Of them we call them.
Futures commission merchants they're like the dealer brokers in the securities world.
And so we've done a spot check but you know what were alleging here is that there is intentional fraud intentional fraud IE somebody lied.
So when you do spot checks I mean year gonna if somebody's gonna -- of somebody's gonna try to break the law.
That's -- pretty tough thing to find out we've also said that there is a misappropriation.
Of funds.
You -- to look at the individual facts and circumstance but that essentially means that.
Money was stolen self what the individual facts and circumstances remain something we're looking at but we're on the case and we're doing our best weekend.
I know I mean I look at IC as recently as January UN and it did a spot -- and found no material breaches of customer funds but how exactly does that work and you say they lied you do take their word for you are looking at bank account balances and what -- the mechanics about.
But those are great questions we've not have only asked them we -- some -- ourselves but this can't get into some of the facts and circumstances but.
I -- a little bit of the time here only because this has been less than 24 hours as you know.
But it's not what it did the little more complicated than people make me think.
OK -- it's been less than 24 hours since this but it's only been nine months since the MF global implosion.
And a lot of people are seeing similarities between these two things in the sense that client money goes missing so it seems like once again.
The correct systems are in place on the part of the regulators to make sure the sort of thing doesn't happen how do you respond to that.
What I couldn't agree with you more -- now we have done something cents MF global we did this regulation -- -- it sounds bureaucratic one point 25.
That said that you had to keep the customer funds sacrosanct -- you couldn't use them for risky -- I can't it happen.
Yet but here we're looking at money that we are saying is essentially stolen.
That's that's that they -- MF global and ongoing investigation also but here we are alleging.
That you know -- money's been misappropriated.
And that they committed fraud so there are many things that we can do one of the things I've talked about for a long time since last November.
Is the need for an insurance fund.
Everybody knows the FDIC if you lose money in -- banking debacle.
Your covered it may lose money in the securities world your coverage but if -- futures customer like a lot of these you know average folks who are invested in this at CM and -- -- -- some sort of don't Arizona makes sense and I know the CME is looking to set up upon like -- they just started that it and I'm sure that makes -- -- let me get back to what you're saying about MF global are you saying that changes have been put in place about wouldn't happen again.
Well a look at somebody's gonna you know try to -- violate the law there are ways around any -- what -- speeding or robbing a bank.
But we can put things in place and we have since MF global to further protect customer funds we're there's certainly more that needs to be done.
For -- go as far as to say that that wouldn't happen again you.
You think the system has been improved somewhat.
It's definitely been improved but you know you could never say never if somebody's out you don't violate the law.
There are ways around it may be a catch -- maybe you don't.
But you know what we have to do is put systems and procedures in place to guard against that at the same time not being overzealous regulators.
And I think we're trying to reach the right balance but you know we're gonna have problems in these markets and that's why we -- insurance fund that's why we need more customer protections in place.
We've made some progress but there's more work to be done.
I'm a laundry list right now customer complaints and finds that were imposed against PFG best over time they.
1996.
I see that in February of 2012 they were -- 700000.
Dollars.
You know related to a Ponzi scheme that was going on and -- It seems like you guys found all sorts of problems all along the way over the past decade or so.
But nobody stepped in to either warn clients are shut these guys down.
How did that happen.
Well the Ponzi scheme wasn't -- -- that was separate from this that it was for these guys were still find in relation to that they must have had some probability at least not watching their clients closing up.
My point is that there are a lot of Bahrain's levied against -- and complaints and I'm wondering why they were still operating.
Well it's a good question of why you know sometimes fines or just the cost of doing business for firms that's why I think we need to be tougher and actually go to the Department of Justice as you know the FBI which -- of the branch of the Department of Justice is investigating this one.
But instead of just doing the crime and paying a fine I think people actually do the time.
Yeah you know my question is because there are people are saying similar things what you're saying today that if somebody wants this deal -- just going to be able to this is the second time that we've seen clients but disappeared under totally different circumstances.
Does that tell you that.
That there needs him more regulation that may -- this particular business model is broken.
Well I think there that the regulations that we're putting in place now as a result of the Dodd-Frank Wall Street reform and consumer protection act are good things I don't think we need additional laws or regulations we need to finish.
Putting the meat on the bones of the existing regulations.
But you know I think it needs to be a culture shift in the financial world enough of this greed is good mentality.
And you don't even have to go back to 2008 and that that calamity to see you know the MF global -- just talked about the Barkley is Libor case that -- talked about before the losing streak it JPM.
-- these -- circumstance we're talking about now there's all sorts of examples where -- greed is good mentality culture there in the financial.
-- -- -- their -- used -- everybody's -- to make money in some bad -- gonna cut corners is almost nothing you can do about that I mean you have to enforce the laws as they stand in and take players out of the game that are you know -- -- because the only way to -- -- -- partnerships is probably.
Too much to hope orbit commissioner Chilton.
We thank you for coming on today and I hope -- will come back when you know more about this case as well as it develops.
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