Federal Regulatory Agencies
Federal Regulatory Agencies
News releases, reports, statements and associated documents from federal regulatory agencies ranging from the Securities Exchange Commission to the Commodities Futures Trading Commission
Featured Stories
USITC Institutes Section 337 Investigation of Certain Liquid Coolers for Electronic Components in Computers, Components Thereof
WASHINGTON, March 16 -- The U.S. International Trade Commission issued the following news release on March 15, 2024:The U.S. International Trade Commission (USITC) voted to institute an investigation of certain liquid coolers for electronic components in computers, components thereof, devices for controlling same, and products containing same. The products at issue in the investigation are described in the Commission's notice of investigation.
The investigation is based on a complaint filed by Cooler Master Co., Ltd. of Taipei City, Taiwan; CMI USA, Inc. of Claremont, CA; and CMC Great USA, ... Show Full Article WASHINGTON, March 16 -- The U.S. International Trade Commission issued the following news release on March 15, 2024: The U.S. International Trade Commission (USITC) voted to institute an investigation of certain liquid coolers for electronic components in computers, components thereof, devices for controlling same, and products containing same. The products at issue in the investigation are described in the Commission's notice of investigation. The investigation is based on a complaint filed by Cooler Master Co., Ltd. of Taipei City, Taiwan; CMI USA, Inc. of Claremont, CA; and CMC Great USA,Inc. of San Jose, CA, on February 14, 2024, and supplemented on March 6, 2024. The complaint alleges violations of section 337 of the Tariff Act of 1930 in the importation into the United States and sale of certain liquid coolers for electronic components in computers, components thereof, devices for controlling same, and products containing same that infringe patents asserted by the complainants. The complainants request that the USITC issue a limited exclusion order and a cease and desist order.
The USITC has identified the following respondents in this investigation:
* SilverStone Technology Co., Ltd. of Taipei City, Taiwan,
* SilverStone Technology, Inc. of Chino, CA,
* Enermax Technology Corp. of Taoyuan City, Taiwan,
* Enermax USA of Chino, CA,
* Shenzhen Apaltek Co., Ltd. of Shenzhen, China, and
* Guangdong Apaltek Liquid Cooling Technology Co., Ltd. of Dongguan City, China.
By instituting this investigation (337-TA-1394), the USITC has not yet made any decision on the merits of the case. The USITC's Chief Administrative Law Judge will assign the case to one of the USITC's administrative law judges (ALJ), who will schedule and hold an evidentiary hearing. The ALJ will make an initial determination as to whether there is a violation of section 337; that initial determination is subject to review by the Commission.
The USITC will make a final determination in the investigation at the earliest practicable time. Within 45 days after institution of the investigation, the USITC will set a target date for completing the investigation. USITC remedial orders in section 337 cases are effective when issued and become final 60 days after issuance unless disapproved for policy reasons by the U.S. Trade Representative within that 60-day period.
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Original text here: https://www.usitc.gov/press_room/news_release/2024/er0315_64974.htm
NRC Schedules Meetings to Discuss 2023 Performance of 3 Tennessee Valley Authority Nuclear Power Plants
WASHINGTON, March 16 -- The Nuclear Regulatory Commission issued the following news release on March 15, 2024:Nuclear Regulatory Commission staff will hold two public meetings this month to discuss the 2023 safety performance of the Tennessee Valley Authority's Browns Ferry, Sequoyah, and Watts Bar nuclear power plants. The NRC is holding one meeting in-person and another virtually to provide more opportunities for the public to attend.
The first meeting is an "open house" on March 20 from 6:30-7:30 p.m. Eastern time at the Spring City Municipal Building, 369 Front St. in Spring City, Tennessee. ... Show Full Article WASHINGTON, March 16 -- The Nuclear Regulatory Commission issued the following news release on March 15, 2024: Nuclear Regulatory Commission staff will hold two public meetings this month to discuss the 2023 safety performance of the Tennessee Valley Authority's Browns Ferry, Sequoyah, and Watts Bar nuclear power plants. The NRC is holding one meeting in-person and another virtually to provide more opportunities for the public to attend. The first meeting is an "open house" on March 20 from 6:30-7:30 p.m. Eastern time at the Spring City Municipal Building, 369 Front St. in Spring City, Tennessee.This is an open forum where NRC resident inspectors and other staff will be available to discuss the plants' safety performance and to answer questions from members of the public.
The second meeting will be held virtually via Microsoft Teams on March 27 from 6:30-7:30 p.m. Eastern time. The telephone conference number for those without access to Teams is 301-576-2978, passcode 621932287#.
The three-unit Browns Ferry plant is in northern Alabama, and the Sequoyah and Watts Bar plants, both of which have two units, are in eastern Tennessee.
The NRC determined that all three plants operated safely during 2023. However, several TVA reactors required additional NRC oversight due to findings of varying safety significance. Browns Ferry Unit 1 was in the second performance category, or the regulatory response column, for most of 2023 due to problems with the high-pressure core cooling system. The reactor returned to a baseline level of NRC oversight in fourth-quarter 2023 following a thorough review of TVA's corrective actions to address the root causes of the problems. Similarly, both Sequoyah units were under increased oversight for security-related issues identified in late 2022. After an NRC supplemental inspection, the units returned to a baseline level of oversight by the end of 2023.
Watts Bar Units 1 and 2 are currently under increased NRC oversight (the second performance category) due to a security-related finding. Additional inspections are planned this year to ensure comprehensive corrective measures are implemented.
The NRC's Reactor Oversight Process uses color-coded inspection findings and indicators to assess plant performance. The colors start at green and increase to white, yellow or red, commensurate with the safety significance of the issues involved. These inputs determine which of five performance categories corresponds to each unit's performance, with units in the first category receiving the least oversight and those in the fifth category required to shut down to address the safety issues.
The annual assessment letters (https://www.nrc.gov/reactors/operating/oversight/listofasmrpt.html) for the TVA plants, including the upcoming inspection plans, are available on the NRC website.
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Original text here: https://www.nrc.gov/cdn/doc-collection-news/2024/24-003-ii.pdf
Litigation: SEC Vs. Evoqua Water Technologies, Imran Parekh
WASHINGTON, March 16 -- The Securities and Exchange Commission issued the following litigation release (No. 1:23-cv-MSM-PAS; D.R.I. filed March 13, 2023) involving Evoqua Water Technologies Corp. and Imran Parekh:* * *
SEC Obtains Final Judgment Against Defendant Imran Parekh for Accounting Violations
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On March 15, 2024, the U.S. District Court for the District of Rhode Island entered a final judgment against Evoqua Water Technologies Corp.'s former division-level finance director, Imran Parekh, in a case the Commission previously filed alleging improper accounting practices. Evoqua is ... Show Full Article WASHINGTON, March 16 -- The Securities and Exchange Commission issued the following litigation release (No. 1:23-cv-MSM-PAS; D.R.I. filed March 13, 2023) involving Evoqua Water Technologies Corp. and Imran Parekh: * * * SEC Obtains Final Judgment Against Defendant Imran Parekh for Accounting Violations * * * On March 15, 2024, the U.S. District Court for the District of Rhode Island entered a final judgment against Evoqua Water Technologies Corp.'s former division-level finance director, Imran Parekh, in a case the Commission previously filed alleging improper accounting practices. Evoqua isbased in Pennsylvania and has a major division located in Rhode Island. Parekh is a resident of Massachusetts.
According to the SEC's complaint, filed on March 13, 2023, from at least the fourth quarter of 2016 through August 2018, Parekh, as the Finance Director of Evoqua's division based in Rhode Island, engaged in fraudulent accounting practices that resulted in Evoqua improperly reporting materially false revenue amounts in its financial statements filed with the Commission.
The final judgment, entered by consent, orders Parekh to pay a civil money penalty of $40,000, orders disgorgement of $5,489 plus prejudgment interest of $1,342, and bars Parekh for ten years from serving as an officer or director of a public company.
On July 10, 2023, the court previously entered a partial judgment by consent against Parekh that permanently enjoined him from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10(b)-5 thereunder; from aiding and abetting any violation of the periodic reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-l, 13a-11, and 13a-13 thereunder; from aiding and abetting any violation of the books and records and internal accounting controls provisions of Sections 13(b)(2)(A) and (B) of the Exchange Act; from knowingly circumventing an issuer's system of accounting controls or knowingly falsifying an issuer's books and records in violation of Section 13(b)(5) of the Exchange Act; and from violating Rule 13b2-1 of the Exchange Act by falsifying or causing to be falsified any books, records, or internal accounts. On July 10, 2023, the court also entered a final judgment by consent against Evoqua.
The case was handled by Kerry Vasta, Jonathan Allen, Peter Moores, David London, and Amy Gwiazda of the Boston Regional Office.
Attachments:
* Final Judgment - Evoqua Water Technologies (https://www.sec.gov/files/litigation/litreleases/2024/judg25950-evoqua.pdf)
* Final Judgment - Imran Parekh (https://www.sec.gov/files/litigation/litreleases/2024/judg25950-parekh.pdf)
* Partial Judgment - Imran Parekh (https://www.sec.gov/files/litigation/litreleases/2024/partjudg25950-parekh.pdf)
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Original text here: https://www.sec.gov/litigation/litreleases/lr-25950
FEC Issues Digest for Week of March 11-15
WASHINGTON, March 16 -- The Federal Election Commission issued the following weekly digest:* * *
Commission meetings and hearings
On March 12 and 14, the Commission met in executive session.
On March 14, the Commission held an open meeting.
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Advisory Opinions
Comment received
Advisory Opinion 2024-01 (Texas Majority PAC) (https://www.fec.gov/data/legal/advisory-opinions/2024-01/) On March 14, the Commission held over discussion of two drafts of Advisory Opinion Request 2024-01, in response to a request from Texas Majority PAC concerning its proposal to hire vendors to canvass potential ... Show Full Article WASHINGTON, March 16 -- The Federal Election Commission issued the following weekly digest: * * * Commission meetings and hearings On March 12 and 14, the Commission met in executive session. On March 14, the Commission held an open meeting. * * * Advisory Opinions Comment received Advisory Opinion 2024-01 (Texas Majority PAC) (https://www.fec.gov/data/legal/advisory-opinions/2024-01/) On March 14, the Commission held over discussion of two drafts of Advisory Opinion Request 2024-01, in response to a request from Texas Majority PAC concerning its proposal to hire vendors to canvass potentialvoters. Texas Majority PAC asks whether canvassing literature and scripts, and their associated costs, would be public communications, coordinated communications, or coordinated expenditures, and about the provision of data resulting from the canvass to a federal candidate or party committee at less than fair market value. The Commission intends to hold a tally vote on the drafts. The Commission received a comment on the drafts, in addition to several other previously submitted comments on the drafts and the advisory opinion request.
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Enforcement
The Commission made public one closed case, as follows. For more information, see the case documents in the Enforcement Query System.
MUR 8122
COMPLAINANT: John Tancredi
RESPONDENTS: Lafazan for Congress and Alex Leibson, in his official capacity as treasurer (the Committee); Joshua Lafazan; Elizabeth D. Lawrence; and Bryan H. Lawrence
SUBJECT: The complaint alleged that the Lawrences made an excessive contribution and/or a contribution in the name of another when they loaned $100,000 to Lafazan to pay his graduate school tuition between September 2020 and September 2021 because this allowed Lafazan to use his personal funds later to make a $166,000 candidate loan to the Committee. The complaint alleged further that the Committee did not properly disclose the Lawrences as the source of the funds reported as a candidate loan from Lafazan. Lafazan was a 2022 primary candidate for New York's 3rd Congressional District.
DISPOSITION: The Commission found no reason to believe that the Lawrences made and Lafazan and the Committee received excessive contributions or that the Committee failed to report the contributions because it appears that (1) the loans were made to support Lafazan's education and were made irrespective of his later candidacy, and do not meet the definition of a contribution, and (2) Lafazan had sufficient assets and personal funds to lend the Committee $166,000. The Commission further found no reason to believe the Lawrences made and Lafazan and the Committee received a contribution made in the name of another because the available information shows that the loans were arm's-length transactions made for the purpose of funding Lafazan's education.
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Alternative Dispute Resolution
The Commission made public three closed cases, as follows. For more information, see the case documents in the Enforcement Query System.
ADR 1138
COMPLAINANT: FEC-Initiated
RESPONDENT: Occupy Democrats Election Fund and Omar Rivero, in official capacity as treasurer (the Committee)
SUBJECT: In the normal course of carrying out its supervisory responsibilities, the Commission initiated proceedings to determine whether there was reason to believe the Committee made a number of reporting errors and other violations of the Federal Election Campaign Act of 1971, as amended (the Act) during the 2021-2022 election cycle, including, among other items: excessive, prohibited, and other impermissible contributions or transfers; mathematical discrepancies; failure to provide supporting schedules; failure to properly itemize disbursements; and independent expenditure reporting problems.
DISPOSITION: The Committee agreed to 1) develop and certify implementation of a process to track receipt of, and response to, communications with the Commission, 2) certify that it amended relevant 2021-2022 reports after consultation with the FEC's Reports Analysis Division, 3) participate in an FEC training program, and 4) pay a civil penalty of $5,300.
ADR 1144
COMPLAINANT: FEC-Initiated
RESPONDENT: Citizens for Responsible Energy Solutions Inc. (CRES)
SUBJECT: In the normal course of carrying out its supervisory responsibilities, the Commission initiated proceedings to determine whether there was reason to believe CRES failed to timely file its 2022 Year-End Report to support $200,000 in independent expenditures as disclosed in one 24-Hour Report.
DISPOSITION: CRES agreed to retain an outside consultant to review compliance procedures and conduct training with those responsible for preparing and filings its reports.
ADR 1145
COMPLAINANT: FEC-Initiated
RESPONDENT: Vicky Hartzler for Senate and Bob Huston, in official capacity as treasurer (the Committee)
SUBJECT: In the normal course of carrying out its supervisory responsibilities, the Commission initiated proceedings to determine whether there was reason to believe the Committee failed to remedy excessive and prohibited 2022 Primary Election contributions totaling $23,824 within the permissible timeframe and whether the Committee received $7,757 in 2022 General Election contributions that were not refunded within the permissible timeframe
DISPOSITION: The Committee agreed to pay a civil penalty of $2,350 and, as it wishes to terminate its political committee status, agreed to certify closure of its federal account and to file a Termination Report with the Commission.
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Regulations and agency procedures
REG 2024-03 Commission Zip Codes On March 14, the Commission approved a Draft Federal Register Notice to correct the Commission's address in the regulations. The technical change clarifies that for purposes of U.S. Postal Service delivery, the Commission's ZIP Code is 20463, and for purposes of physical location as well as for all other deliveries, including by courier or by private delivery service, the Commission's ZIP Code is 20002.
Statement of Policy Regarding Commission Action in Matters at the Initial Stage in the Enforcement Process On March 14, the Commission approved a Policy Statement providing that the Commission generally will either dismiss a matter or find "reason to believe" concerning an alleged violation. On March 13, the Commission received a comment from Campaign Legal Center on the proposed Policy Statement.
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Litigation
Campaign Legal Center v. FEC (Case No. 22-5339) On February 27, Citizens for Responsibility and Ethics in Washington (CREW) filed an Unopposed Motion for Invitation to File Brief as Amicus Curiae in Support of Appellant's Petition for Rehearing En Banc and on February 28, it filed a Corrected Brief of Amicus Curiae in Support of Appellant's Petition for Rehearing En Banc. On March 8, the Commission filed a Response to Petition for Rehearing En Banc in the U.S. Court of Appeals for the District of Columbia Circuit. On March 11, the Appeals Court issued a Per Curiam Order granting the CREW's motion to file as amicus curiae.
End Citizens United PAC v. FEC (Case No. 22-5277) On February 28, Citizens for Responsibility and Ethics in Washington filed a Corrected Brief of Amicus Curiae in Support of the Appellant's Petition for Rehearing En Banc in the U.S. Court of Appeals for the District of Columbia Circuit. On March 8, the Commission filed a Response to Petition for Rehearing En Banc. Also on March 8, the NRSC and NRCC filed an Unopposed Motion for Invitation to File Brief as Amici Curiae and a Brief as Amici Curiae in Opposition to the Appellant's Petition for Rehearing En Banc.
National Republican Senatorial Committee, et al. v. FEC, et al. (Case No. 24-3051) On March 11, the following items were filed in the U.S. Court of Appeals for the Sixth Circuit: 1) Motion of Ohio and 12 Other States for Leave to File Brief of Amici Curiae in Support of Plaintiffs-Appellants; 2) Brief of Amici Curiae of the State of Ohio and 12 Other States in Support of Appellants; 3) Motion for Leave to File A Corrected Brief; 4) Corrected Brief of Amicus Curiae Senator Mitch McConnell in Support of Plaintiffs-Appellants; and 5) Brief of Institute for Free Speech as Amicus Curiae in Support of Plaintiffs-Appellants.
Palmer v. FEC (Case No. 23-5216) On March 8, the U.S. Court of Appeals for the District of Columbia Circuit issued a Per Curiam Order granting the Commission's Motion for Summary Affirmance.
Ready to Win v. FEC (Case No. 23-5161) On March 6, Plaintiff-Appellant filed an Emergency Motion to Recall Mandate and/or for Reconsideration of Dismissal Due to Mootness in the U.S. Court of Appeals for the District of Columbia Circuit. On March 11, the Appeals Court issued a Per Curiam Order denying the motion.
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Commissioner statements
On March 15, Vice Chair Ellen L. Weintraub and Commissioner Shana M. Broussard issued a Statement on the Petitions for Rehearing En Banc in Campaign Legal Center v. FEC and End Citizens United PAC v. FEC.
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Outreach
On March 12-13, the Commission hosted a webinar for political party committees.
On March 13, Commissioner Broussard participated in a panel discussion at the Brookings Institution entitled "The Dangers Posed by AI and Disinformation During Elections."
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Press releases
FEC approves Federal Register notice, Statement of Policy concerning enforcement process (issued March 14)
FEC cites committees for failure to file 12-Day Pre-Primary Financial Report (issued March 15)
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Upcoming Commission meetings and hearings
March 26, 2024: The Commission is scheduled to meet in executive session.
March 27, 2024: The Commission is scheduled to hold an open meeting.
April 16, 2024: The Commission is scheduled to meet in executive session.
April 18, 2024: The Commission is scheduled to hold an open meeting.
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Upcoming educational opportunities
April 3, 2024: The Commission will host FECFile webinars for PACs and party committees.
April 4, 2024: The Commission will host FECFile webinars for candidate committees.
April 16-17, 2024: The Commission will host a webinar for corporations and their PACs.
For more information on upcoming training opportunities, see the Commission's Trainings page.
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Upcoming reporting due dates
March 20: March Monthly Reports are due. For more information, see the 2024 Monthly Reporting schedule.
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Additional research materials
Election Dates. The Commission has posted Preliminary 2024 Presidential and Congressional Primary Dates, which are subject to change.
Contribution Limits. In addition to the current limits, the Commission has posted an archive of contribution limits that were in effect going back to the 1975-1976 election cycles.
Federal Elections 2020: Election Results for the U.S. President, the U.S. Senate and the U.S. House of Representatives is now available. The data was compiled from the official vote totals published by state election offices.
FEC Notify: Want to be notified by email when campaign finance reports are received by the agency? Sign up here.
The Combined Federal State Disclosure and Election Directory is available. This publication identifies the federal and state agencies responsible for the disclosure of campaign finances, lobbying, personal finances, public financing, candidates on the ballot, election results, spending on state initiatives and other financial filings.
The Presidential Election Campaign Fund Tax Checkoff Chart provides information on balance of the Fund, monthly deposits into the Fund reported by the Department of the Treasury, payments from the Fund as certified by the FEC, and participation rates of taxpayers as reported by the Internal Revenue Service. For more information on the Presidential Public Funding Program, see the Public Funding of Presidential Elections page.
The FEC Record is available as a continuously updated online news source.
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Other election-related resources
Videos on protecting U.S. elections. The FBI's Protected Voices initiative provides videos designed to help political campaigns protect themselves from foreign influence. The 2019 videos offer guidance on ransomware, business email compromise, supply chain, social media literacy, and foreign influence operations. Other videos, released in 2018, include cyber hygiene topics such as social engineering, patching, router hardening, and app and browser safety.
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Join the FEC on Twitter and YouTube
Follow @FEC on Twitter to receive the latest information on agency updates, news releases, and weekly activity. Subscribe to our YouTube channel, FECTube: FECConnect on Demand, to watch instructional videos that have been designed to help candidates and committees comply with federal campaign finance laws. Note that the FEC is not currently available through other social media platforms. The use of the agency's logo, name, and likeness on other media has not been authorized by the FEC.
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Original text here: https://www.fec.gov/updates/week-of-march-11-15-2024/
CFTC Commissioner Pham Issues Statement on Administrative Proceedings
WASHINGTON, March 16 -- The Commodity Futures Trading Commission issued the following statement on March 15, 2024, by Commissioner Caroline D. Pham on administrative proceedings:* * *
The appropriate use of agency administrative proceedings has generated much debate. I have previously shared my views on the Commission's use of administrative proceedings before a hearing officer in the absence of an Administrative Law Judge (ALJ) and in lieu of filing an action in federal court.[1] I now turn to other uses of the Commission's agency adjudication authority. The federal courts serve as an essential ... Show Full Article WASHINGTON, March 16 -- The Commodity Futures Trading Commission issued the following statement on March 15, 2024, by Commissioner Caroline D. Pham on administrative proceedings: * * * The appropriate use of agency administrative proceedings has generated much debate. I have previously shared my views on the Commission's use of administrative proceedings before a hearing officer in the absence of an Administrative Law Judge (ALJ) and in lieu of filing an action in federal court.[1] I now turn to other uses of the Commission's agency adjudication authority. The federal courts serve as an essentialpart of the checks-and-balances inherent in the separation of powers embodied in the United States Constitution, and therefore the use of administrative proceedings that bypasses the courts merits scrutiny.[2]
I.
As I have previously noted, the federal courts impose discipline on the tendency for administrative agencies to exercise power for self-aggrandizement.[3] Among other things, federal courts identify violations or deficiencies by administrative agencies in the application or interpretation of the law, sufficiency of factual evidence to support the alleged charges, lack of fair notice, and abuse of discretion or process.[4]
However, administrative proceedings, where the agency is the prosecutor, judge, and jury, lack the checks-and-balances imposed by separation of powers between the executive and judicial branches of government to ensure a fair hearing and due process. I have noted the simple fact that the Commission has nearly boundless discretion in exercising its prosecutorial authority in bringing enforcement actions, and is rarely challenged in imposing administrative sanctions and penalties.[5] It thus falls upon the Commission to uphold the highest standards of integrity, diligence, and excellence in our administrative actions to maintain the public's trust in the CFTC's ability to oversee our markets with fairness and in service to justice.[6] It is paramount that the Commission is an objective finder of fact and neutral arbiter of law that respects the Constitution and Constitutional rights.[7] I say again that there must be no bias in the administration of justice and due process.[8]
II.
Recent Supreme Court jurisprudence has stated that "whether any form of administrative adjudication is constitutionally permissible likely turns on the nature of the right in question. If private rights are at stake, the Constitution likely requires plenary Article III adjudication,"[9] and, "[t]o the extent that administrative agencies could, consistent with the Constitution, function as courts, they might only be able to do so with respect to claims involving public or quasi-private rights" (also referred to as governmental privileges or government benefits and entitlements).[10] Critically, "[p]rivate rights encompass the three 'absolute' rights, life, liberty, and property,"[11] and serious issues have been raised regarding the authority of administrative agencies to routinely deprive persons of property through adjudication in administrative proceedings.[12]
III.
With respect to public rights bestowed by the government, some examples include registration and licensing to conduct certain activities pursuant to regulatory frameworks. The Commodity Exchange Act establishes various categories of market participants that must be registered in order to engage in activity in the derivatives markets. These CFTC registrants must comply with extensive requirements, including character and fitness standards. Accordingly, one of the important functions that is foundational to the mission of the CFTC to promote market integrity and protect against fraud, abuse, and manipulation in our markets, is the Commission's authority to oversee such a registration framework, and to revoke the registration of persons convicted of certain felony charges, including for financial crimes involving fraud, through an administrative proceeding.[13]
Because CFTC registration to conduct business in our markets is a governmental privilege, I believe administrative proceedings to revoke registration are appropriate. I commend CFTC staff and the Division of Enforcement for their vigilance in protecting our markets from misconduct.
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Footnotes:
[1] Dissenting Statement of Commissioner Caroline D. Pham Regarding the Filing of Administrative Complaints for Enforcement Actions, "Shotgun Hearings and Quickie Defaults," U.S. Commodity Futures Trading Commission (Sept. 29, 2023), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement092923.
[2] Id. Cf. Statement of Commissioner Caroline D. Pham on Effective Self-Regulation and Notice of Proposed Rulemaking to Amend Part 40 Regulations, U.S. Commodity Futures Trading Commission (Jul. 26, 2023), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement072623b.
[3] E.g., Pham, supra note 1.
[4] E.g., CFTC v. Archegos Cap. Mgmt. LP, No. 22-CV-3401 (JPO), 2023 WL 6123102 at 3, 4, 6 (S.D.N.Y. Sept. 19, 2023) (dismissing CFTC's complaint with prejudice and finding that the ETF Swaps and Custom Basket Swaps are security-based swaps not under the CFTC's jurisdiction because the CFTC's theory regarding the ETF Swaps "does not comport with the statutory definition," CFTC failed to allege that the ETF Swaps are mixed swaps in its Amended Complaint, and "CFTC conflates discretionary authority and unilateral authority" regarding the Custom Basket Swaps) and Concurring Statement of Commissioner Caroline D. Pham Regarding Amended Complaint, U.S. Commodity Futures Trading Commission (Oct. 21, 2022), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement102122 (explaining that ETF swaps are security-based swaps under the law); Clarke v. CFTC, 74 F.4th 627, 641-43 (5th Cir. 2023) (finding that the CFTC's withdrawal of a no-action letter was the "epitome of arbitrary and capricious action," the CFTC engaged in "obvious post hoc rationalization," and the CFTC violated the Fifth Circuit's previous injunction); CFTC v. EOX Holdings, Inc., 90 F.4th 439, 441, 446, 448 (5th Cir. 2024) (holding that "Defendants lacked fair notice of the CFTC's unprecedented interpretation of this thirty-nine-year-old rule" promulgated in 1984, and finding the "CFTC's construction of the Rule to be thoroughly unpersuasive" and the "CFTC's own online glossary" "undermines the CFTC's position"); Jessica Corso, Forex Firm Wants CFTC Sanctioned for 'Bad Faith' Behavior, Law360 (Mar. 11, 2024) (reporting on motion for sanctions against the CFTC for a "'pattern of misconduct' that includes knowingly submitting false statements to the court and attempting to intrude on attorney-client privilege"), citing CFTC v. Traders Glob. Grp. Inc., No. 3:23-cv-11808 (D.N.J. Mar. 7, 2024). See, e.g., Grayscale Inv., LLC v. SEC, 82 F.4th 1239 (D.C. Cir. 2023) (reversing the SEC's order rejecting Grayscale's spot Bitcoin ETF proposal as acting "arbitrarily and capriciously"); Cboe Futures Exch., LLC v. SEC, 77 F. 4th 971 (D.C. Cir. 2023) (overturning the SEC's order treating SPIKES index securities as futures rather than security futures as "arbitrary and capricious"); SEC v. Dig. Licensing Inc. dba DEBT Box, No. 2:23-cv-00482, SEC's Response to the Court's Nov. 30, 2023 Order to Show Cause, ECF 233 at 1 (D. Utah Dec. 21, 2023) (acknowledging that the SEC fell short of expectations by making and failing to correct inaccurate representations, and assigning a new trial attorney to lead the litigation team, designating senior attorneys from another regional office to supervise the matter, and committing to mandatory agency-wide training for staff about the duty of accuracy and candor and the duty to correct any inaccuracies as soon as they come to light).
[5] Dissenting Statement of Commissioner Caroline D. Pham on Examination by Enforcement, U.S. Commodity Futures Trading Commission (Aug. 29, 2023), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement082923b.
[6] Pham, supra note 1.
[7] Statement of Commissioner Caroline D. Pham on the Deliberative Process Privilege, U.S. Commodity Futures Trading Commission (Oct. 23, 2023), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement102323.
[8] Id.
[9] Axon Enter., Inc. v. FTC, 598 U.S. 175, 203 (2023) (Thomas, J., concurring).
[10] Id. at 202 (quoting B&B Hardware, Inc. v. Harris Indus., Inc., 575 U.S. 138, 171 (2015) (Thomas, J., dissenting)).
[11] Axon at 198 (internal quotations and citations omitted).
[12] Id. at 204 ("Naturally, merely labeling the deprivation of a core private right a 'civil penalty' cannot allow Congress and agencies to circumvent constitutional requirements," and "[b]y permitting administrative agencies to adjudicate what may be core private rights, the administrative review schemes here raise serious constitutional issues"). E.g.,
Jarkesy v. SEC, 34 F.4th 446 (5th Cir. 2022), rehr'g en banc denied, 51 F.4th 644 (5th Cir. 2022), cert. granted, 143 S. Ct. 2688 (2023) (mem. op.).
[13] The Commission's authority to revoke registration pursuant to certain enumerated bases is set forth in section 8a(2)(D) of the Commodity Exchange Act, 7 U.S.C. Sec. 12a(2)(D) (commonly referred to as "statutory disqualification"). The process for administrative proceedings is set forth in 17 C.F.R. Parts 3 and 10.
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Original text here: https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement031524
CFTC Commissioner Johnson Issues Statement on Proposed Consent Order Against Empires Consulting
WASHINGTON, March 16 -- The Commodity Futures Trading Commission issued the following statement on March 15, 2024, by Commissioner Kristin N. Johnson on proposed consent order against Empires Consulting Corp.:* * *
The Commodity Futures Trading Commission (CFTC or Commission) announced the filing of a Proposed Consent Order to resolve claims against a Ponzi-scheme operator that fraudulently solicited more than $41.6 million from at least 12,500 individuals in the U.S. and abroad.
From at least September 2020 through February 2022, Defendant Empires Consulting Corp. (Empires Consulting) and ... Show Full Article WASHINGTON, March 16 -- The Commodity Futures Trading Commission issued the following statement on March 15, 2024, by Commissioner Kristin N. Johnson on proposed consent order against Empires Consulting Corp.: * * * The Commodity Futures Trading Commission (CFTC or Commission) announced the filing of a Proposed Consent Order to resolve claims against a Ponzi-scheme operator that fraudulently solicited more than $41.6 million from at least 12,500 individuals in the U.S. and abroad. From at least September 2020 through February 2022, Defendant Empires Consulting Corp. (Empires Consulting) andco-Defendants Emerson Pires, Flavio Goncalves, and Joshua Nicholas solicited funds from customers in the U.S. and abroad through commodity interest pools under the name of "EmpiresX." Pool participants understood their funds were being invested into "futures products" such as commodity futures and binary options, as well as stocks and other products traded on multiple markets and available 24 hours a day. In fact, Defendants deposited only $1 million of participant funds in a futures trading account at Interactive Brokers. Defendants also used participant funds to hold or trade digital asset commodities, including bitcoin (BTC), ether (ETH), and tether tokens (USDT).
Throughout the scheme, Defendants made numerous misrepresentations, including creating fake websites that mimicked real trading websites, misrepresenting their trading success on weekly update calls, and creating statements for pool participants with false account balances and investment returns. Defendants also misrepresented that their registration status with the Commission. Defendants misappropriated over 75% of the customer funds deposited with their enterprise. The misappropriated funds were used for luxury travel, fine dining, expensive car leases, and retail shopping to facilitate celebrity-like lifestyles.
Nicholas is currently serving a 51-month prison sentence in Florida for securities fraud committed as a part of this scheme. Pires and Goncalves are believed to be in Brazil and the Department of Justice continues to seek their extradition.
On June 30, 2022, the CFTC charged Empires Consulting with violations of Sections 4m(1), 4o(1)(A) and (B), and 6(c)(1) of the Commodity Exchange Act. Empires Consulting is currently controlled by a receiver appointed by a Florida state court in a putative class action regarding the same conduct.
Under the Proposed Consent Order announced today, Empires Consulting faces permanent trading and registration bans and must pay $32 million in restitution and an additional $32 million as a civil monetary penalty. The Consent Order also requires Empires Consulting to continue to cooperate with the CFTC in the ongoing litigation and in any related future investigation or action.
Another Example of a Ponzi Scheme
Despite the high-tech gloss, the scheme here is simply garden-variety fraud and an old-school Ponzi scheme. This case represents yet another in a recent line of similar cases.[1] As I have previously noted,
[t]his age-old sleight of hand gained its contemporary moniker "Ponzi scheme" from the 1920's financial fraud perpetuated by Charles Ponzi.[2] For proof of the enduring and pernicious legacy of fraudsters such as Ponzi and his predecessors, recall the revelation of Bernie Madoff's $50 billion Ponzi scheme.[3] Prosecutors continue to work today--a decade after Madoff confessed that his investment advisory fund was "all just one big lie" --to compensate victims.[4]
The CFTC has appropriately taken a strong stance in this matter, which reflects an intent to effectively address fraud in our markets, with a laser focus on eliminating fraud schemes that target retail customers. I have repeatedly made clear that protection of customer funds is one of the CFTC's core missions:
creating and enforcing effective, well-tailored rules governing the custody, investment, and preservation of customer funds must be among the Commission's highest priorities. Without these rules and rigorous enforcement, our markets would lack the foundation of trust upon which every transaction is built.[5]
The CFTC must act preemptively to protect customer funds through appropriate regulation, and I have continuously advocated for the preservation and extension of such customer-focused regulation. When misuse of funds and fraud nevertheless occurs, as here, the CFTC must forcefully respond with enforcement action.
I want to expressly recognize the hard work of the Division of Enforcement staff on this case, including Ben Sedrish, Heather Dasso, Elizabeth Pendleton, Scott Williamson, and Robert Howell.
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Footnotes:
[1] See, e.g., CFTC Release No. 9706-23, CFTC Charges Five Defendants with Fraudulent Digital Assets Trading Scheme, May 24, 2023, https://www.cftc.gov/PressRoom/PressReleases/8706-23; Statement of Commissioner Kristin N. Johnson: Enforcement Action To Stop Bitcoin Fraud Targeting the Spanish-Speaking Community, May 24, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement052423; CFTC Release No. 8660-23, CFTC Charges California-based Company and Its CEO with Fraudulent Solicitation and Misappropriation of Digital Asset Commodities, Feb. 16, 2023, https://www.cftc.gov/PressRoom/PressReleases/8660-23; Statement of Commissioner Kristin N. Johnson Regarding Fraud and Misappropriation by a Digital Asset Ponzi Scheme, Feb. 16, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement021623; CFTC Release No. 8656-23, CFTC Charges Three Puerto Rico Residents and Their Companies with Misappropriating Over $13 Million in Connection with Commodity Pool Ponzi Scheme, Feb. 13, 2023, https://www.cftc.gov/PressRoom/PressReleases/8656-23; Statement of Commissioner Kristin N. Johnson Regarding CFTC Action Against Retail Forex Ponzi Scheme Targeting Spanish Speakers in Puerto Rico and the Continental United States, Feb. 14, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement021423.
[2] In addition to careful academic scholarship and investigative journalism revealing the impact of Charles Ponzi's scheme, popular television and film continue reference Ponzi's scheme. For example, one finds colorful explanations of Ponzi's scheme and descriptions of investors who suffered losses as a result of the scheme in Comedy Central, Drunk History, "Scoundrels," Downton Abbey; and Boardwalk Empire.
[3] Diana Henriques, The Wizard of Lies: Bernie Madoff and the Death of Trust (2011).
[4] See U.S. Dep't Just., Justice Department Announces Total Distribution of Over $4 Billion to Victims of Madoff Ponzi Scheme, Sept. 28, 2022, https://www.justice.gov/opa/pr/justice-department-announces-total-distribution-over-4-billion-victims-madoff-ponzi-scheme. See Statement of Commissioner Kristin N. Johnson Regarding CFTC Action Against Retail Forex Ponzi Scheme Targeting Spanish Speakers in Puerto Rico and the Continental United States (Johnson Ponzi Statement), Feb. 14, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/ johnsonstatement021423.
[5] Kristin N. Johnson, Commissioner, CFTC, Statement on Preserving Trust and Preventing the Erosion of Customer Protection Regulation (Nov. 3, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/johnstatement110323.
[6] See id.
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Original text here: https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement031524b
CFTC Commissioner Johnson Issues Opening Statement at Market Risk Advisory Committee Future of Finance Subcommittee Meeting
WASHINGTON, March 16 -- The Commodity Futures Trading Commission issued the following opening statement on March 15, 2024, by Commissioner Kristin N. Johnson at the Market Risk Advisory Committee Future of Finance subcommittee meeting:* * *
It is my pleasure to welcome you to the Market Risk Advisory Committee's (MRAC) Future of Finance (FoF) Subcommittee meeting.
The Promise and Peril of AI
Increasingly, diverse industries and sectors of our economy identify opportunities to integrate aspects of the assemblage of technologies that we commonly describe as artificial intelligence or AI technologies. ... Show Full Article WASHINGTON, March 16 -- The Commodity Futures Trading Commission issued the following opening statement on March 15, 2024, by Commissioner Kristin N. Johnson at the Market Risk Advisory Committee Future of Finance subcommittee meeting: * * * It is my pleasure to welcome you to the Market Risk Advisory Committee's (MRAC) Future of Finance (FoF) Subcommittee meeting. The Promise and Peril of AI Increasingly, diverse industries and sectors of our economy identify opportunities to integrate aspects of the assemblage of technologies that we commonly describe as artificial intelligence or AI technologies.AI enables doctors to diagnose and map diseases earlier, faster, and with greater accuracy than ever before in the history of medicine.[1] Farmers who cultivate crops that feed our nation may integrate AI to better manage access to vital resources such as freshwater, enabling more efficient irrigation, fertilization, and crop rotation leading to more sustainable farming.
In our markets, AI offers similar efficiencies for faster trade execution and settlement, more accurate pricing prediction, and more precise risk management oversight.[2] Markets have witnessed increased adoption of AI including AI-driven investment advising, trade execution, risk management, and market surveillance.[3]
Notwithstanding this promise, we must account for the potential perils of integrating innovation without proper guardrails. A few years ago, a branch manager of a Japanese company in Hong Kong received a call from the director of his parent business.[4] The instructions delivered during the call indicated that, in connection with a pending acquisition, the bank employee should transfer $35 million to a designated account. Having received emails confirming the legitimacy of the transaction, and because he spoke with the director by phone often and recognized his voice, the branch manager kindly obliged, followed the instructions, and transferred the funds. The calls and emails were deep fakes that relied on, among other technologies, AI voice-cloning technology and the transfer was an Oceans-Eleven style scam.
As this final use case illustrates, the ability of machines or more specifically supervised and unsupervised machine learning algorithms to process vast quantities of data to address disease, water management, or food scarcity is only part of the story.
Regulators have identified notable concerns regarding the development, testing, and deployment of AI.[5] Multiple standard setting authorities note the need for increased oversight regarding "governance, development, testing, monitoring, data quality and bias, transparency and explainability, outsourcing; and ethical concerns."[6]
As a primary concern, it is imperative to increase market and prudential regulators' understanding of how the underlying technology operates, the integrity of the inputs that it relies upon, the potential for neutral technologies to engender biased outcomes, and legal obligations to ensure that outcomes comply with principles of fairness and transparency.
Regulatory Responses
In October 2022, the White House Office of Science and Technology Policy published The Blueprint for an AI Bill of Rights ("AI Bill of Rights") to "support the development of policies and practices that protect civil rights and promote democratic values" in the development of artificial intelligence systems.[7] The White House engaged in significant collaboration with the public through panel discussions, public listening sessions, requests for information, and other informal means of engagement prior to publication to help guide the drafting of the AI Bill of Rights. Though it is non-binding, the AI Bill of Rights offers guidance to the American public on how to safely and responsibly deploy AI.The AI Bill of Rights outlines five key principles to guide the use and regulation of AI. These principles involve: (1) protection from unsafe and ineffective systems; (2) avoiding algorithmic discrimination; (3) data privacy protection; (4) notice and explanation and (5) opportunities to opt out and access to humans who can consider and remedy problems.
AI Safety Institute
At the end of last year, the Biden Administration announced the creation of an AI Safety Institute, housed within the Commerce Department, which will be established within NIST, the National Institute of Standards and Technology.[8] NIST was founded in 1901 and is one of the nation's oldest physical science laboratories. Congress established NIST to "promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology."[9]
The AI Institute will "operationalize" NIST's existing AI Risk Management Framework to "create guidelines, tools, benchmarks, and best practices for evaluating and mitigating dangerous capabilities and conducting evaluations including red-teaming to identify and mitigate AI risk."[10] These guidelines will include "technical guidance that will be used by regulators considering rulemaking and enforcement on issues such as authenticating content created by humans, watermarking AI-generated content, identifying and mitigating against harmful algorithmic discrimination, ensuring transparency, and enabling adoption of privacy-preserving AI."[11]
To support the AI Institute, NIST announced this month the creation of the AI Safety Institute Consortium, which will gather together hundreds of stakeholder organizations across the public and private sectors to "develop science-based and empirically backed guidelines and standards for AI measurement and policy, laying the foundation for AI safety across the world."[12] The Consortium members will contribute work in areas such as developing guidelines for identifying and evaluating AI capabilities, with a focus on capabilities that could potentially cause harm and developing tools, methods, protocols for the testing and development of AI, among several other planned workstreams.[13]
We are not alone in our efforts to ensure responsible innovation. International standard setting authorities and other market and prudential regulators have outlined similar principles.
Domestic and International Standards--A Principles-Based Framework
As early as 2017, the Financial Stability Board (FSB) issued a report on market developments related to AI and the financial stability implications. The Financial Stability Oversight Council (FSOC) and the Financial Industry Regulatory Authority (FINRA) have published recommendations that offer guidelines for governing AI.
More recently, the International Organization of Securities Commissions issued a report following a consultation on the use of AI by market intermediaries. These efforts include a number of common threads, suggesting that, while many questions remain, there are important areas of consensus regarding the right approach to AI in financial markets. A few of these commonalities include:
* A focus on the governance of AI models. FSOC "recommends monitoring the rapid developments in AI, including generative AI, to ensure that oversight structures keep up with or stay ahead of emerging risks to the financial system while facilitating efficiency and innovation."[14] "Regulators should consider requiring firms to have designated senior management responsible for the oversight of the development, testing, deployment, monitoring and controls of AI and [machine learning]. This includes a documented internal governance framework, with clear lines of accountability."[15]
CFTC regulations, for example, introduce important governance obligations for registered market participants. Designated Clearing Organizations must establish a Risk Management Committee "comprised of clearing members and customers of clearing members on matters that could materially affect the risk profile of the DCO" and Risk Management Working Groups composed of market participants.[16] Enhanced risk management oversight and governance best practices will play an important role in managing the development and implementation of this new technology.
* Promoting the explainability of AI models. Many AI models are "black-box" models, meaning that it may be difficult and in some cases impossible, to explain their decision-making processes. Accordingly, FSOC, IOSCO, the FSB, and FINRA have all emphasized the importance of addressing the explainability challenge.[17] As FINRA explains put it, [i]ncorporating explainability as a key consideration in the model risk management process for AI-based applications."[18]
* The need for data controls. Data quality, security and privacy are central concerns for regulators as market participants adopt AI models. FSOC recent report notes, "data controls like data quality, suitability, security, privacy, and timeliness are vital to sound AI use."[19] Similarly, FINRA calls for "data governance efforts" including: "data review for potential bias," "data source verification," "data integration," "data security," and "data quality benchmarks and metrics."[20]
* Implementing measures to address bias. In 2019, I testified before Congress and voiced my concerns that AI models trained on incomplete or inaccurate data may engender biased results. The White House AI Bill of Rights appropriate emphasizes the need to ensure fairness and guard against bias. In its report, FSOC notes that "specific requirements to prevent discrimination or bias that apply to tools, models, or processes used in consumer compliance also apply to AI. This is an important consideration because without proper design, testing, and controls, AI can lead to disparate outcomes, which may cause direct consumer harm and/or raise consumer compliance risks."[21]
* Testing and monitoring output. Protecting against bias, promoting explainability, and implementing governance strategies are only possible where models are properly tested and monitored. FSOC, IOSCO, the FSB, and FINRA have each emphasized the importance of testing. FSOC notes the responsibility of financial institutions to "monitor the quality and applicability of AI's output" - the ability of regulators to "help to ensure that they do so."[22] Similarly, the FSB recognizes the importance of "[a]ssessing AI and machine learning applications for risks, including adherence to any relevant protocols regarding data privacy, conduct risks, and cybersecurity."[23] Existing approaches to issues like cybersecurity offer some guidance. Last year, in a statement regarding a proposed cyber resilience rulemaking, I noted the importance of comprehensive regulation in this area, including regulations that capture mission-critical third-party service providers.[24] Model testing and oversight, which concerns cybersecurity, and much more, must similarly be comprehensive in the parties and the issues that it captures.
Five years ago, I began to convene and participate in convenings of AI developers, adopters, academics, government and industry researchers and regulators and public interest organizations. In 2020, a co-author and I received invitations to publish two books, one of which examines the ethical implications of AI across diverse sectors of our society. In two recent speeches, a speech last month before the New York Bar Association and a speech at Japanese Fintech Week in Tokyo, Japan, I have advocated for the CFTC to begin to identify best practices for integrating AI in our markets.
I have advocated for greater visibility and transparency regarding our registrants' use of AI by expanding our annual systems examination questionnaire to incorporate questions that directly inquire about the adoption of AI and related risks.
I have also advocated for the development of a principles-based framework. In consultation with members of this working group of the Market Risk Advisory committee, I look forward to exploring a principles-based regulatory framework that underscores intelligibility, risk management, compliance, oversight, market responsibility, notice, and explainability.
I have advocated for the Commission to consider introducing heightened penalties for those who intentionally use AI technologies to engage in fraud, market manipulation, or the evasion of our regulations.
Finally, the Commission should lead in creating an inter-agency task force focused on information sharing and composed of market and prudential regulators including the CFTC, SEC, Federal Reserve System, OCC, CFPB, FDIC, FHFA, and NCUA.
The task force would support the AI Safety Institute in developing guidelines, tools, benchmarks, and best practices for the use and regulation of AI in the financial services industry. The task force may provide recommendations to the AI Safety Institute as well as evaluate proposals coming out of the Institute.
We are fortunate to have Jessica Reiner, MRAC Member and Future of Finance Subcommittee Member and Managing Director and Head of Digital Finance at the Institute of International Finance (one of the institutions that will help advance the development and deployment of safe, trustworthy AI under the AI Safety Institute.
Today's Subcommittee Meeting
Today's meeting represents an important part of this work. I am excited about each of our panels and speakers. We will hear from several panels of invited guests from across the public and private sectors discussing the following four topics:
1. AI in Financial Markets Today;
2. Current Financial Markets Rules Are Implicated by AI;
3. AI-Related Risks;
4. What We Anticipate in the Near Future.
Alessandro Cocco, Vice President in the Financial Markets Group at the Federal Reserve Bank of Chicago, on detail at the U.S. Department of the Treasury will lead our first panel - AI in Financial Markets Today; this panel includes:
* David Palmer, Senior Supervisory Financial Analyst, Division of Banking Supervision and Regulation at the Federal Reserve Board of Governors;
* Kevin Werbach, Liem Sioe Liong, First Pacific Company Professor and Chair of the Department of Legal Studies and Business Ethics at The Wharton School, The University of Pennsylvania;
* Jessica Renier, Managing Director and Head of Digital Finance, Institute of International Finance; and
* Lisa Schirf, Managing Director, Global Head of Data and Analytics, Tradeweb.
The panel will discuss use cases for this technology its interaction with financial markets, as well as market structure and characteristics.
Petal Walker, former counsel to CFTC Commissioner Sharon Bowen and current Member of the Advisory Board of Liquidity Lock Global Markets, will moderate a panel discussing Current Financial Markets Rules Are Implicated by AI.
The panel will feature:
* Jason Harrell, Managing Director, Operational and Technology Risk and Head of External Engagement, Depository Trust & Clearing Corporation;
* David Felsenthal, Counsel to CFTC Chairman Rostin Behnam, Commodity Futures Trading Commission; and
* Chen Arad, Co-founder & Chief External Affairs Officer, Solidus Labs, Inc.
The panel will engage in conversation on the state of regulatory engagement with AI.
Rebecca Rettig, Chief Legal and Policy Officer, Polygon Labs will moderate a panel discussing AI-Related Risks. Panelists include:
* Yesha Yadav, Professor of Law, Milton R. Underwood Chair and Associate Dean, Vanderbilt Law School;
* Pauline Kim, Daniel Noyes Kirby Professor of Law, Washington University in St. Louis;
* Tamika Bent, Chief Counsel to Commissioner Kristin Johnson, Commodity Futures Trading Commission; and
* Dr. Eammon Hart, PhD, Mathematics, Drexel University.
The panel will discuss the risks attendant to the use of AI technology.
Finally, Gary Kalbaugh, Deputy General Counsel and Director, ING Financial Holdings Corp. will moderate a panel discussing What We Anticipate in the Near Future.
Panelists include:
* Purvi Maniar, General Counsel, FalconX Holdings Ltd.;
* Natalie Tynan, Associate General Counsel, Head of Technology Documentation Strategy, Futures Industry Association, Inc.; and
* Robert Mahari, Doctoral Candidate, Harvard Law School and the MIT Media Lab.
The panel will discuss what may be on the horizon for AI use and potential responses by both regulators and market participants.
I would like to express my appreciation to our MRAC Chair Alicia Crighton, my staff, including Julia Welch, ADFO for the FOF Subcommittee, Tamika Bent and Peter Janowski, DFO and ADFO for MRAC and Rebecca Lewis ADFO for two other MRAC Subcommittees as well as each of the moderators, panelists and committee members for their presence today and their continued work in these areas. I look forward to today's important discussions.
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Footnotes:
[1] Commissioner Kristin Johnson, Building A Regulatory Framework for AI in Financial Markets: Regulating AI in Financial Markets New York City Bar Association: Emerging Technology Symposium (Feb. 23, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/opajohnson10; Commissioner Kristin Johnson, Artificial Intelligence and the Future of Financial Markets, Manuel F. Cohen Lecture, George Washington University Law School (Oct. 17, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/opajohnson7b.
[2] Kristin N. Johnson & Carla L. Reyes, Exploring the Implications of Artificial Intelligence, 8 J. Int'l & Comp. L. 315, 315 (2021).
[3] Id.
[4] Thomas Brewster, Fraudsters Cloned Company Director's Voice In $35 Million Heist, Police Find, Forbes (Oct 14, 2021), https://www.forbes.com/sites/thomasbrewster/2021/10/14/huge-bank-fraud-uses-deep-fake-voice-tech-to-steal-millions/.
[5] Int'l Org. of Sec. Comm'ns Bd., The Use of Artificial Intelligence and Machine Learning by Market Intermediaries and Asset Managers 17 (2021), https://www.iosco.org/library/pubdocs/pdf/IOSCOPD684.pdf (IOSCO Report)
[6] Id.
[7] The Blueprint for an AI Bill of Rights: Making Automated Systems Work for the American People, White House Off. of Sci. & Tech. Pol'y 2 (2022), https://www.whitehouse.gov/wp-content/uploads/2022/10/Blueprint-for-an-AI-Bill-of-Rights.pdf.
[8] Press Release, FACT SHEET: Vice President Harris Announces New U.S. Initiatives to Advance the Safe and Responsible Use of Artificial Intelligence, White House (Nov. 1, 2023), https://www.whitehouse.gov/briefing-room/statements-releases/2023/11/01/fact-sheet-vice-president-harris-announces-new-u-s-initiatives-to-advance-the-safe-and-responsible-use-of-artificial-intelligence/.
[9] About NIST, NIST.gov, https://www.nist.gov/about-nist (last visited Feb. 23, 2024).
[10] Vice President Harris Announces New U.S. Initiatives to Advance the Safe and Responsible Use of Artificial Intelligence, supra note 4.
[11] Id.
[12] U.S. Artificial Intelligence Safety Institute, NIST.gov, https://www.nist.gov/artificial-intelligence/artificial-intelligence-safety-institute (last visited Feb. 23, 2024).
[13] Id.
[14] Financial Stability Oversight Council. 2023 Annual Report. Washington, D.C.: Council, December 14, 2023. https://home.treasury.gov/system/files/261/FSOC2023AnnualReport.pdf.
[15] Report at 17, supra.
[16] 88 Fed. Reg. 44675, 44675.
[17] Financial Stability Oversight Council 2023 Annual Report at 92, supra.
[18] The Financial Industry regulatory Authority (FINRA), Report on Artificial Intelligence (AI) in the Securities Industry, June 2020, https://www.finra.org/sites/default/files/2020-06/ai-report-061020.pdf.
[19] Financial Stability Oversight Council 2023 Annual Report at 92, supra.
[20] FINRA Report, supra.
[21] Financial Stability Oversight Council 2023 Annual Report at 92, supra.
[22] Id.
[23] Financial Stability Board, Artificial intelligence and machine learning in financial services: Market developments and financial stability implications at 34, https://www.fsb.org/wp-content/uploads/P011117.pdf.
[24] Kristin N. Johnson, Commissioner, CFTC, Statement Regarding the CFTC's Notice of Proposed Rulemaking on Operational Resilience Program for FCMs, SDs, and MSPs (Dec. 18, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement121823.
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Original text here: https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement031524