April 3, 2026

The Desk: April Edition

Stuart Armstrong, P. Barrett Morris, Drew P. Newman, Tiffany Payne, Nader Raja Moore & Van Allen PLLC + Follow Contact LinkedIn Facebook X Send Embed

Enforcement Round-Up

New Enforcement Director, Updated Enforcement Priorities, and Forthcoming Self-Reporting and Cooperation Policy Changes

As previewed in last month’s update, on March 2, 2026, Chairman Michael Selig formally announced former federal prosecutor and Greenberg Traurig alum David I. Miller as the CFTC’s new Director of Enforcement. Miller replaces Paul Hayeck, who had served as Acting Director since June 2025. Chairman Selig’s announcement confirmed that Hayeck will remain in a senior enforcement role as Chief of the Division’s Complex Fraud Task Force.

In his first major speech as Director of Enforcement to the NYU Law School Program on Corporate Compliance and Enforcement on March 31, 2026, Director Miller signaled a clear shift in tone and focus for the CFTC’s enforcement program. Emphasizing that “the era of regulation by enforcement is over,” Miller stated that the Division will focus on its core mission of policing fraud, manipulation, and abuse across the derivatives markets within its jurisdiction, rather than using enforcement actions to advance regulatory policy. Under Chairman Selig’s leadership, the Division intends to prioritize transparency, fairness, and decisiveness, drawing on Miller’s experience as both a federal prosecutor and defense attorney.

Miller identified five enforcement priority areas going forward: (1) insider trading, including in prediction markets; (2) market manipulation, with particular emphasis on energy markets due to their “inelastic demand and limited sustainability”; (3) market abuse and disruptive trading practices such as spoofing and wash trades; (4) retail fraud, including Ponzi schemes and AI-enabled scams, in particular fraud schemes that target at-risk populations; and (5) willful violations of AML and KYC obligations. He stressed that the Division will focus on serious and willful misconduct—not technical or inadvertent violations—and will make criminal referrals to DOJ where appropriate, particularly in manipulation and AML cases.

A central theme of the speech was the CFTC’s stance on insider trading in prediction markets, where Miller rejected the notion that such conduct is permissible or beneficial. He grounded the agency’s authority in Section 6(c)(1) of the Commodity Exchange Act and Rule 180.1, emphasizing that misappropriation‑based insider trading is unlawful across futures and swaps and underscoring the CFTC’s position that event contracts are swaps. Miller stressed that the CFTC’s concerns over potential insider trading is not limited to event contracts premised on potential sports-related injuries but also includes transaction activity involving the illegal use of government information. Miller further emphasized that the CFTC’s focus is on misappropriated information and clarified that “you are absolutely entitled to trade on MNPI that you rightfully own.” In addition, Miller highlighted the critical role of exchanges as the first line of defense, noting their obligations to maintain robust surveillance, prevent manipulation, and ensure listed contracts are not susceptible to abuse.

Finally, Miller announced that the Division will soon issue a revised cooperation advisory, including meaningful changes to the Division’s declination policy, which will rescind the current cooperation policy issued in February 2025. The purpose of the updated advisory is to enhance clarity, incentivize early and good‑faith engagement, and reinforce that cooperation credit is earned through substance—not form. While the exact parameters of any changes will be confirmed in the forthcoming advisory, Miller previewed that the updated framework will be grounded in fundamental fairness and will, absent aggravating circumstances, allow a party to receive a declination even where additional time is needed to conduct an internal investigation, so long as the entity acts diligently, preserves evidence, and engages transparently with the Division. He further signaled that cooperation determinations will be simplified and more predictable, moving away from incremental crediting toward a binary assessment—entities will be deemed either fully “in” or entirely “out”—with declinations reserved for those that satisfy all core cooperation expectations. Finally, Miller emphasized that meaningful remediation, including addressing root causes, strengthening compliance controls, and holding responsible individuals accountable, and “full restitution to injured parties” are also prerequisites to receiving a declination.

CFTC Secures Default Judgment in a Long-Standing Fraud Action

On March 13, 2026, the CFTC announced that the U.S. District Court for the Eastern District of New York entered a default judgment against Safety Capital Management Inc. and GNS Capital Inc., both doing business as ForexnPower, for retail forex fraud, fraud by commodity pool operators and commodity trading advisors, and related regulatory violations. The judgment resolved all remaining claims in an enforcement action originally filed on September 25, 2015. Together, the firms were ordered to pay more than $1.4 million in civil monetary penalties and over $800,000 in restitution. Although the case was initiated more than a decade ago, the outcome underscores the CFTC’s continued focus on retail fraud schemes targeting vulnerable populations, including elderly investors and, in this instance, Korean‑language speakers in Queens, New York. Two individual defendants associated with the firms had previously pleaded guilty or were found guilty in parallel criminal proceedings.

CFTC Secures Injunctive Relief Against Foreign Digital Assets Exchange

On March 30, 2026, the CFTC announced that the U.S. District Court for the Southern District of New York entered a consent order against Peken Global Limited, a Turks and Caicos Islands entity operating the KuCoin digital asset exchange. The order permanently enjoins Peken Global from permitting U.S. participants to trade directly on its electronic trading and order‑matching platform without registering with the CFTC as a foreign board of trade. The CFTC filed the enforcement action in March 2024. Under the consent order, Peken Global agreed to pay a $500,000 civil monetary penalty. The CFTC did not seek, and the court did not impose, disgorgement based on the particular facts and circumstances of the case, including the company’s cooperation during the CFTC’s investigation and related proceedings. In a parallel criminal matter, Peken Global pleaded guilty to one count of operating an unlicensed money transmitting business. This action underscores the CFTC’s continued focus on the extraterritorial application of U.S. derivatives and commodities laws to foreign digital asset platforms that provide U.S. persons with direct trading access.

CFTC and SEC MOU

Also in March, the CFTC and the SEC announced their “historic” Memorandum of Understanding formalizing enhanced coordination between the agencies. While the MOU broadly addresses inter‑agency cooperation across regulatory, supervisory, and policy functions, it contains several notable enforcement‑related commitments.

As a foundational principle, the agencies expressly acknowledge the importance of providing fair notice to market participants and avoiding “regulation by enforcement.” (MOU at 4.) Consistent with that principle, the MOU provides that the agencies will proactively consult and coordinate on enforcement actions and investigations that could materially impact an entity, product, or market implicating overlapping regulatory interests. (Id. at 8.)

Importantly, the MOU emphasizes that such coordination is intended to occur early in the investigative process, rather than after enforcement trajectories have already been set. The agencies specifically state that coordination should not be deferred until the issuance of a Wells notice or similar pre‑charging communication by one or both regulators. (Id. at 10.) The MOU also contemplates information‑sharing and alignment on investigative strategy, remedies, and sequencing where appropriate, with the stated goal of promoting consistency, proportionality, and predictability in enforcement outcomes. (Id. at 9–10.)

By committing to early consultation and shared awareness of investigations, the agencies signal an effort to reduce surprise, inconsistent charging theories, and last‑minute inter‑agency conflicts. It remains to be seen whether and to what extent these coordination principles meaningfully shape the enforcement landscape.

Tiffany Payne

Joint Agency NPR on Regulatory Capital Rule

On March 19, 2026, the Federal Deposit Insurance Corporation, Federal Reserve Board and Office of the Comptroller of the Currency (the “Agencies”) requested comment on three proposals to modernize the regulatory capital framework and maintain the strength of the banking system.

MVA’s Bank Regulatory Team will have a thorough analysis of the rule coming shortly, but in the interim we wanted to dive into the revised market risk framework, which will be applicable to Category I and II depository institution holding companies and to other banking organizations with significant trading activity. “Significant trading activity” means more than $5 billion in trading activity (current threshold is $1 billion) or trading activity equal to or higher than 10% of the banking organization’s total assets. The Agencies indicate that the proposed rule is designed to improve the measurement of systemic risk when it comes to levying additional capital requirements on the largest and most complex banks.

The proposal provides an expanded risk-based approach, revising the standardized and models-based approaches by replacing the VaR-based measure of market risk (i.e., how much money could I lose on a bad day?), with an expected shortfall-based measure (i.e., if things go badly, how bad on average?). If adopted, these measures could positively impact risk calculations of maximum potential derivatives exposure and enhance the ability to underwrite gross or net derivatives exposures. Banks can also use a models-based approach with prior approval from their prudential regulator. While the current rules permit the use of models at the level of the consolidated banking organization, the proposed rules introduce the concept of using models at the “trading desk level”, subject to certain requirements and testing. Both approaches are intended to more accurately measure risk and give a better early warning sign.

Specifically related to market risk for trading desks, the proposal would include a risk-sensitive framework for capturing the risks associated with credit valuation adjustment (“CVA”) risk for derivative exposures. The CVA framework would apply to Category I and II holding companies and depository and other banking organizations with significant trading activity and at least $1 trillion in notional derivative exposure. Client-facing derivative transactions are exempt from the CVA requirement.

The proposed rule also provides changes through revisions to reporting, recordkeeping, and disclosure requirements.

With a view to facilitating market participants' understanding of the financial condition and risk management practices of banking organizations subject to the expanded risk-based approach, the proposed rule would revise certain existing qualitative disclosure requirements and introduce new and enhanced qualitative disclosure requirements and remove most of the existing required quantitative disclosures in favor of regulatory reporting forms. The current capital rule's requirements regarding public disclosure policy and attestation, the frequency of required disclosures, the location of disclosures, or the treatment of proprietary information will not change.

Barrett Morris & Stuart Armstrong

IOSCO Report on Good Practices for OTC Commodities Derivatives Markets

On March 19, 2026, the International Organization of Securities Commissions (“IOSCO”) published a Consultation Report on Good Practices concerning over-the-counter Commodity Derivatives Markets (CR/01/26) (the “Report”). The report proposes a set of good practices intended to shore up global regulators’ ability to monitor, aggregate, and act on OTC commodity derivatives data, particularly during periods of market stress. As a reminder the CFTC is a member of IOSCO and sits on its Board of Directors.

Background

The Report builds on IOSCO’s November 2024 targeted implementation review of its Principles for the Regulation and Supervision of Commodity Derivatives Markets. That review assessed compliance with selected Principles 9, 12, 14, 15, and 16 and found that, while regulators and exchanges were broadly in line, three persistent pain points remained: (1) obtaining and aggregating OTC data, (2) monitoring large, concentrated positions across exchange-traded and OTC venues, and (3) intervening effectively when markets go sideways. The 2022 LME nickel crisis, a severe dislocation in LME nickel prices (a 250% spike in 24 hours) and an eight day suspension of trading, was attributed to a massive short position held by Chinese nickel tycoon Xiang Guangda’s Tsingshan group that spanned OTC, exchange-traded, and physical markets and served as the November 2024 review’s cautionary tale.

In April 2025, IOSCO kicked off two roundtable meetings and bilateral discussions with market participants, trade associations, and exchanges to develop the recommendations in the Report.

What the Report Covers

The Report hones in on three Principles and proposes good practices for each:

1. Principle 12 (Authority to Obtain Information). IOSCO is pushing for regulators to have the tools and legal authority to collect OTC derivatives data; including, beneficial ownership information, and aggregate it with exchange data to build a holistic picture of market exposure. The Report also acknowledges that certain OTC contracts, particularly physically settled commodity forwards, often fall outside the regulatory perimeter of securities regulators entirely, creating blind spots. In an effort to remediate the issue, IOSCO advocates for cross-regulator information-sharing arrangements to fill those gaps rather than expanding jurisdictional scope.
2. Principle 15 (Intervention Powers). The Report sets expectations around timely regulatory intervention to prevent or address disorderly market conditions, especially where OTC risks spill over into exchange-traded markets. IOSCO calls for transparent intervention policies and improved information flows so that market participants understand the ground rules—and so that regulators can actually act before contagion spreads.
3. Principle 16 (Unexpected Disruptions). Closely related to Principle 15, the proposed practices here emphasize enhanced cooperation between exchanges, regulators and local regulators across jurisdictions when markets are under stress. The LME nickel crisis, where a disorderly unwind in London rippled across global commodity markets, creating significant price disruption in OTC derivatives markets, serves as an instructive reminder for this Principle in the Report. The Proportionality Guardrail

Notably, IOSCO is not proposing a one-size-fits-all framework. The report explicitly advocates for proportionate, risk-based, and market-specific approaches to OTC data collection and intervention. The relevance and volume of OTC activity varies considerably by commodity underlying and jurisdiction. What makes sense for crude oil may not make sense for agricultural derivatives, and the good practices are designed to accommodate that diversity. The IOSCO Committee on Derivatives Chair Carol McGee emphasized the intent to support “consistent and effective implementation” in a manner “adaptable to different market structures.”

Practical Takeaways

For market participants, a few things stand out. First, the direction of travel toward greater OTC data transparency is clear, and market participants who trade commodity derivatives across multiple venues and jurisdictions should expect regulators to come asking for more granular position and beneficial ownership data. Second, the emphasis on cross-regulator information-sharing could have implications for how firms structure their compliance and reporting obligations, particularly those with cross-border commodity derivative books. Third, the intervention framework, if adopted, could give regulators more explicit tools to act in periods of stress, which means firms should be thinking about how emergency market interventions could affect open positions.

Significant market volatility has the potential for trading a price disruption. Firms should consider how they wholistically address price source disruption and disruption fallbacks in OTC commodity derivatives. The standard Market Disruption Events and Disruption Fallbacks may not always result in a preferred outcome or an outcome based on market consensus or intervening actions taken by exchanges and regulatory bodies. Inconsistency in these contractual terms in OTC commodity derivatives can also create disparate results and a scramble to assess the impact of significant market events on the trading book.

Comment Period

The consultation is open for comment through June 19, 2026. Feedback will inform a final report that IOSCO intends to use as guidance for implementing the Principles globally.

Barrett Morris & Stuart Armstrong

MLB Is Not the Only Body That Prepared for Opening Day; CFTC and MLB Pen Historic MOU

On March 19, 2026, the Commodity Futures Trading Commission (“CFTC” or “Commission”) and Major League Baseball (“MLB”) announced the signing of a Memorandum of Understanding (“MOU”) establishing a cooperation framework “concerning issues of common interest including protecting the integrity of professional baseball and the relating prediction markets.” The MOU will allow the CFTC and MLB to exchange information in order to swiftly respond to incidents and emerging trends that may impact the integrity of professional baseball and prediction markets.

The MOU authorizes each party to share information received under the MOU at the other party’s sole discretion and in accordance with any disclosure regulations or policies the information is subject to (e.g., the Commodity Exchange Act, the Freedom of Information Act). The MOU also follows the CFTC’s March 12 Prediction Markets Advisory “reminding designated contract markets of their regulatory obligations”.

Though the Commission has long entered into MOUs with domestic and foreign regulators and financial supervisory bodies (see chart below), the MOU with the MLB marks the first entered into with a professional sports league, and likely the first with a commercial enterprise that does not have regulatory or self-regulatory authority over banking or financial markets, but ultimate regulatory authority over the game of baseball.

| Topic | MOUs With |
| Cooperation for Enforcement | Regulatory authorities in more than 20 jurisdictions and a multilateral MOU with more than 130 foreign authorities. |
| Cooperation for Supervisory, Prudential, and Risk Assessment Purposes | Foreign authorities and exchanges in 14 countries and a multilateral MOU with 21 foreign authorities |
| Supervision of Alternative Investment Fund Industry | Foreign authorities in 28 countries |
| Cooperation Related to Technical Assistance | Foreign authorities in 5 countries |
| Fintech Cooperation Arrangements | Foreign authorities in 4 countries |
Given the rapid developments in event contract markets and the potential for fraud, manipulation and abuse related to professional sports event contracts, this MOU signals that the CFTC is committed to policing the integrity of these new markets with the same rigor as the commodity markets underlying other futures contracts, just as the MLB is committed to preserving the integrity of America’s Pastime.

Stuart Armstrong

Interesting Links:

• Bipartisan Legislation Proposed to Ban Sports Prediction Market Contracts
• ECB Tells Banks to Identify Leverage Providers on SRT Deals
• Financial Stability Board Issues Its Annual Report
• State of Washington Files Suit Against Kalshi
• ISDA OTC Compliance Calendar
• CME Rebuffs Traders Seeking To Recoup Losses From Outage

• CFTC Publishes FAQs for Crypto Assets and Blockchain Technologies
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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