By Michelle Price
WASHINGTON (Reuters) – Wall Street companies and others that break the rules should be required to admit their wrongdoing when settling enforcement actions, especially as the growth of retail investing puts more Americans at risk, a U.S. regulator told Reuters.
Christy Goldsmith Romero, a commissioner at the Commodity Futures Trading Commission (CFTC), said she planned to use her vote on enforcement actions to push for more admissions of wrongdoing, particularly from repeat-offender Wall Street companies.
“We’ve seen Wall Street banks get one enforcement action after another, after another, after another and the deterrence doesn’t seem to be working, so I’m looking for a greater deterrent impact,” she told Reuters on Thursday.
“If a defendant has to admit to their conduct and suffer the full consequences, maybe they won’t engage in the same conduct.”
On Tuesday, the CFTC and the Securities and Exchange Commission fined 16 financial firms, including Bank of America, Citigroup, Goldman Sachs and Morgan Stanley, a combined $1.8 billion because staff used personal devices to discuss trades and deals, violating record-keeping rules.
In a victory for the agencies, the 16 institutions admitted the facts and acknowledged that they violated federal laws.
But that’s unusual. It is common for civil regulators to include language in settlements requiring the company “neither admit nor deny” the agency’s findings, a clause that protects the company from private litigation, among other adverse secondary consequences.
Goldsmith Romero, who joined the CFTC in March after a decade serving as the watchdog of a key 2009 financial crisis bailout program, said the CFTC was “routinely” agreeing to include the wording in settlements without negotiation.
“Why are we doing that? Consequences often flow from illegal conduct, and I don’t think it’s the government’s job to alleviate those consequences.”
The CFTC should push for admissions of wrongdoing in cases of egregious conduct, recidivism, or where the agency needs to send a message about a particular issue, among other factors, she said.
Growing retail participation in the markets increases the need for greater accountability and deterrence, she added.
“Particularly as we have crypto and other digital asset retail products coming in, I think it’s going to be incredibly important that we require defendant admissions.”
The CFTC’s sitting commissioners vote to approve enforcement settlements.
“I am hopeful that there will be change, but I am going to use my vote to try to bring change as well,” said Goldsmith Romero.
(Reporting by Michelle Price; editing by Jonathan Oatis)
