FROM: FEDERAL TRADE COMMISSION
Aaron's Prohibited from Using Monitoring Technology, Must Obtain Consumer Consent Before Using Location-Tracking Software
Aaron’s, Inc., a national, Atlanta-based rent-to-own retailer, has agreed to settle FTC charges that it knowingly played a direct and vital role in its franchisees’ installation and use of software on rental computers that secretly monitored consumers including by taking webcam pictures of them in their homes.
According to the FTC’s complaint, Aaron’s franchisees used the software, which surreptitiously tracked consumers’ locations, captured images through the computers’ webcams – including those of adults engaged in intimate activities – and activated keyloggers that captured users’ login credentials for email accounts and financial and social media sites.
“Consumers have a right to rent computers free of cyberspying and to know when and how they are being tracked by a company,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “By enabling their franchisees to use this invasive software, Aaron’s facilitated a violation of many consumers’ privacy.”
The complaint alleges that Aaron’s knew about the privacy-invasive features of the software, but nonetheless allowed its franchisees to access and use the software, known as PC Rental Agent. In addition, Aaron’s stored data collected by the software for its franchisees and also transmitted messages from the software to its franchisees. In addition, Aaron’s provided franchisees with instructions on how to install and use the software.
The software was the subject of related FTC actions earlier this year against the software manufacturer and several rent-to-own stores, including Aaron’s franchisees, that used it. It included a feature called Detective Mode, which, in addition to monitoring keystrokes, capturing screenshots, and activating the computer’s webcam, also presented deceptive “software registration” screens designed to get computer users to provide personal information.
Under the terms of the proposed consent agreement with the FTC, Aaron’s will be prohibited from using monitoring technology that captures keystrokes or screenshots, or activates the camera or microphone on a consumer’s computer, except to provide technical support requested by the consumer.
In addition, Aaron’s will be required to give clear notice and obtain express consent from consumers at the time of rental in order to install technology that allows location tracking of a rented product. For computer rentals, the company will have to give notice to consumers not only when it initially rents the product, but also at the time the tracking technology is activated, unless the product has been reported by the consumer as lost or stolen. The settlement also prohibits Aaron’s from deceptively gathering consumer information.
The agreement will also prevent Aaron’s from using any information it obtained through improper means in connection with the collection of any debt, money or property as part of a rent-to-own transaction. The company must delete or destroy any information it has improperly collected and transmit in an encrypted format any location or tracking data it collects properly.
Under the agreement, Aaron’s will also be required to conduct annual monitoring and oversight of its franchisees and hold them to the requirements in the agreement that apply to Aaron’s and its corporate stores, and to terminate the franchise agreements of franchises that do not meet those requirements.
The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through Nov. 21, 2013, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments in electronic form should be submitted online by following the instructions on the web-based form. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.
Saturday, October 26, 2013
Friday, October 25, 2013
CFTC COMMISSIONER O'MALIA'S ADDRESS TO EDISON ELECTRIC INSTITUTE CFTC COMPLIANCE FORUM
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Keynote Address by Commissioner Scott D. O'Malia, Edison Electric Institute CFTC Compliance Forum, Washington, DC
October 17, 2013
The topic of today's conference is "Compliance and Implementation Issues." I must say such a topic gives us plenty of room to have a wide-ranging discussion, as there are so many questions and concerns regarding industry compliance and on-going implementation.
As we all know, the Dodd-Frank Act was enacted following the G-20 agreement in Pittsburgh in September 2009 to undertake comprehensive financial reform. The G-20 agreement proposed four main objectives of derivatives reform. First, report all data to a data repository. Second, require that all standardized derivatives contracts be exchange traded "as appropriate." Third, require clearing to be done through central counter parties. Fourth, impose higher collateral charges for all uncleared over-the-counter (OTC) products.
Since the passage of Dodd-Frank, the CFTC has been busy with an aggressive schedule of rule promulgation. Today we have finalized just over 60 rules including Dodd-Frank and non-Dodd Frank rule.
This new regulatory regime has had a profound impact on market structure as it has imposed new obligations, higher levels of transparency, and higher standards for risk management. Many of these new rules will have a positive impact on financial markets.
However, I have serious concerns about the Commission’s rule making process and schedule, as well as the statutory foundation of many rules and their overall impact on end-users.
Today, I would like to discuss three topics. First, I would like to address the implementation of the rules, both in terms of compliance already under way and what we need to think about going forward. Second, I would like to discuss the regulatory impact on end-users. Finally, I would like to discuss my concerns about the Commission’s preparedness to oversee the implementation of the Dodd-Frank regulatory regime.
The Process: Sacrificing Transparency and Certainty for Speed
From the beginning of my time at the Commission, I have been very concerned with the Commission's rulemaking process. As you may know, I have been disappointed with the Commission’s failure to develop a transparent rulemaking schedule that would enable market participants to plan for compliance with the massive new obligations imposed by these rules. In addition, I believe the Commission has rushed the rulemaking process, prioritizing getting rules done fast over getting them done right. This approach has compromised the legal soundness and consistency of our rules.
Stark evidence of the Commission’s flawed rules, and their unachievable compliance deadlines, can be seen in the massive number of exemptions and staff no-action letters issued to provide relief from them. To date, we have issued over 130 exemptions and staff no-action letters. That amounts to more than two exemptions for every rule passed. In nearly two dozen cases, the relief provided is for an indefinite period of time – thus making them de facto rulemakings, which didn't go through the Administrative Procedure Act or proper cost-benefit analysis. It is clear that the Commission has abused the no-action relief process.
Market participants are confused regarding the application of our rules, and how or when they must be applied. Further, since the Commission doesn't vote on staff no-action letters, they don't appear in the Federal Register. And you won't find the exemptive letters in our rulebook either. This lack of transparency and consistency will drive a compliance officer crazy.
One area where the Commission has made one of its biggest process fouls is the lack of robust cost-benefit analysis. Without a doubt, the comprehensive nature of the Dodd-Frank regulatory regime will have a significant cost impact on all market participants, and yet the Commission has failed to conduct appropriate and rigorous quantitative and qualitative analysis of our proposed rules. Understanding whether the benefits of the rules outweigh the costs is a common sense tool to determine the least burdensome solution to the problem.
The Commission has so far been able to get away with such inadequate cost-benefit analysis because the current governing statute sets a low bar. I support Congressional efforts to revise our statutory cost-benefit obligations in order to require the Commission to undertake a more rigorous quantitative and qualitative analysis, putting us on par with other federal agencies. I support Chairman Conaway's efforts (H.R. 1003) and hope the House and Senate will pass this legislation.
Implementation: What's Coming
While I have a longer list of process fouls committed by the Commission, I would like to turn to upcoming rules that will have a significant impact on end-users in particular.
The Commission is currently considering the position limit rule do-over. When I say the Commission, I mean that literally. During the shutdown there is no staff available to discuss this rule proposal. We can't make revisions. We can't ask questions about the rationale or justification. We can't even discuss with staff whether or not the proposed limits would have an appropriate impact to curb "excessive speculation."
The Commission is pursuing a dual track on position limits. Later this year, an appeals court will hear our argument urging it to overturn a federal district court’s ruling to vacate the original position limit rule. The district court found that the Commission failed to provide a finding of necessity as directed by the statute. Simultaneously, we are drafting a nearly identical rule arguing more strenuously that Congress made us do it, and that Congress really didn't want to know whether these rules are "necessary" or "appropriate."
Frankly, I find it interesting that the proposed rule will argue on one hand that Congress wanted position limits and that we aren't bound to apply an appropriateness standard – and then, on the other hand, argue in the cost-benefit analysis that these rules are well considered and will have the intended impact based on our analysis.
Another important rulemaking that will be before the Commission shortly is the application of capital and margin for all OTC trades. While I am pleased that the international community has worked together to make the standards consistent, make no mistake: these rules will increase the cost of hedging. End-users will be spared from mandatory margin exchange. However, nobody will receive a break from the new capital charges. These are new costs imposed on banks to offset the risk posed by OTC trades. Needless to say, these costs will be passed on to end-users.
I agree with Sean Owens, an economist with Woodbine Associates, who stated that under Dodd-Frank, "end users face a tradeoff between efficient, cost-effective risk transfer and the need for hedge customization. The cost implicit in this trade off include: regulatory capital, funding initial margin, market liquidity and structural factors."1
There is no doubt that these new requirements will have serious economic consequences for financial markets. And regulators should not take this lightly. In an effort to coordinate with international regulators, the Commission will re-propose its capital and margin rules. But even under the more accommodating margin requirements, the Commission must evaluate additional costs to end-users by conducting an in-depth cost-benefit analysis.
Happy Anniversary: 1st Anniversary of Futurization
It was one year ago, almost to the day, that the energy markets switched from trading swaps to futures. This huge shift was triggered by the then-impending effective date of the swap and swap dealer definitions. To avoid trading swaps and being caught in the unnecessary, costly and highly complex de minimis calculation imposed on swap dealers, energy firms shifted their trading from swaps to futures, literally overnight.
Based on the complexity of our swaps rules and the cost-efficiency of trading futures, it makes sense that participants would make this change. I'm interested to hear more from end-users like you how this shift has impacted your hedging strategies.
I must warn you that there are several more changes coming up that will continue to impact energy markets. First, the Commission is considering a draft futures block rule that will be proposed to limit the availability of block trades.
Second, as I noted before, OTC margin and capital rules will increase the cost of OTC bilateral deals. This draft rule should be published by the end of the year.
Third, the European Union (EU) is considering whether it will find acceptable the U.S. rules allowing a minimum one-day margin liquidation requirement for futures and swaps on energy products. Europe might not recognize U.S. centralized counterparties as qualified and, as a result, ban EU persons from accessing these markets. The EU is insisting on a two-day margin liquidation minimum. I am told that this would have the practical effect of increasing margin requirements for energy trades by 40 percent. I’m not sure how this will be resolved, but I suspect it will be closely tied to U.S. recognition of the European regulatory regime.
End-Users
Now let me turn to my second topic: how our rules treat end-users.
Congress was very clear about protecting end-users from Dodd-Frank's expansive regulatory reach. As a result, many end-users assumed that they wouldn't be impacted by these rules. Clearly, they are no longer under such misconceptions.
The swap dealer definition is a good example of how the Commission failed to accurately interpret Dodd-Frank and broadly applied the swap dealer definition to all market participants. The Commission ignored the express statutory mandate to exclude end-users from its reach. The swap dealer final rule requires entities to navigate through a complex set of factors on a trade-by-trade basis, rather than provide a bright line test. While I appreciate that the Commission set an $8 billion de minimis level to exclude trades from a dealer designation, it remains challenging to determine what is in and what is out from this safe harbor.
As part of the complexity of the swap dealer definition, the Commission has applied inconsistent and incoherent requirements around bona fide hedging as part of the dealer calculation. The hedge exclusion from the dealer definition applies only to physical, but not financial, transactions. The Commission should apply a consistent definition for hedging.
Another complexity that the Commission has imposed on end-users is the definition of a volumetric option. Specifically, to determine whether a volumetric option is a forward or a swap, the rule applies a seven-part test. But the real kicker is that under the seventh factor, contracts with embedded volumetric optionality may qualify for the forward contract exclusion only if exercise of the optionality is based on physical factors that are outside the control of the parties. This is in contradiction to how volumetric options have been traditionally used by market participants, makes no sense and provides absolutely no certainty for market participants.
The Commission has seemingly gone out of its way to create complex rules that generally result in an outcome of heads we win, tails you lose. We need to clean up the definition and create reliable and well-defined safe harbors. If we don't, I would encourage Congress to revisit the statute.
Commission Readiness: The Consequences of a “Ready, Fire, Aim” Approach
Let me move now to my third main topic: Commission readiness to properly oversee the implementation of its Dodd-Frank regulatory regime. There are two questions I have regarding this issue. The first question is pretty straightforward: is the Commission prepared to effectively oversee the new swaps markets? I believe the answer to this question is "no."
Take the area of registration. The Commission’s new swaps regime has created multiple new categories of Commission registrants, and in each category there has been an inconsistent and uncertain process with the bar constantly moving for applicants. For example, it has been ten months since the first swap dealer application arrived. Today, we have 89 temporarily registered applications totaling over 180,000 pages and we haven’t signed off on single application as complete or final.
With regard to swap data repository (SDR) registration, it has taken the Commission eight to ten months to register just three SDRs under temporary status. We have exceeded our own self-imposed limit of 180 days in some cases and we still haven’t issued a final SDR determination.
As for the registration of swap execution facilities (SEFs), while we have registered 18 entities under a temporary basis, I can only imagine how long it will take for a SEF to secure final approval, especially when we admit that we didn’t read the rulebooks in order to meet the arbitrary October 2 effective date. My guess is that it will be a long and painful process as we insist on evolving revisions to SEF rulebooks while trading is going on.
Another area where the Commission has not been adequately prepared to do its job is in connection with swap data being submitted under new reporting regulations. Despite imposing aggressive compliance requirements on the market, the Commission doesn't have the tools in place to effectively utilize the new data being reported to SDRs, and it doesn't have a surveillance system in either the futures or swaps market that I would regard as adequate or modern.
Today, the data we receive from SDRs requires extensive cleaning and changes to make it useful. As chairman of the Commission’s Technology Advisory Committee (TAC), I have devoted significant TAC attention and resources to aid this effort. Stemming from our TAC meeting in April, a working group including Commission staff and the SDRs has been established and is working to harmonize data fields to aid in our ability to easily aggregate and analyze data across SDR platforms. It will take time before we are able to access, aggregate and analyze data efficiently.
I am also disappointed with our current stance on the oversight of SEFs. Despite the October 2 start-up date for SEFs, the Commission relies on self-regulatory organizations to send data via Excel spreadsheet. There is no aggregation capacity and I am not aware of any plan to automate this process for the less than two thousand swap trades that occur on a daily basis.
My second question: is the Commission sufficiently familiar with the readiness of the market to adapt to our rules? The answer to this question is also "no." As I discussed earlier, evidence of this failure can be found in the Commission’s extensive use of no-action relief tied to arbitrary deadlines. The Commission needs to do a better job of understanding the significant compliance challenges facing market participants as a result of new regulations.
Pre-Trade Credit Checks: Time for the TAC to Revisit the Issue
Let me give you a brief example of one challenge we are dealing with today. The Commission has been working toward a goal of straight-through processing of trades and clearing to prevent any trade failures due to credit issues. Just recently, the Commission has started insisting that SEFs provide functionality to pre-check all trades for adequate credit at the futures commission merchant (FCM) to guarantee a trade. In general, I support this objective. However, market participants were not prepared to comply with this new requirement by October 2, the date SEFs began operation.
Consistent with the Commission’s practice of issuing last-minute ad-hoc relief, the day before the SEF start-up date, staff issued a delay of the pre-trade credit checks for one month until November 1. We are just two weeks away from this new deadline and it is clear that not all SEFs, FCMs, credit hubs and customers are fully interconnected. Without end-to-end fully tested connectivity, I suspect trades will continue to be done over the phone – stalling limit order book trading.
This is a topic that we discussed at the recent TAC meeting on September 12. It was clear at that meeting that the pieces were not in place and additional time is needed.
With the arbitrary November 1 deadline looming and the Commission yet to provide confused swap market participants with necessary guidance on a host of unresolved issues, often stemming from a lack of clarity in the SEF rules, I believe additional time is required. The Commission has not provided adequate time to complete the on-boarding process and conduct the technology testing and validation that is necessary. We should also consider phasing in participants, similar to our approach with clearing, in order to avoid a big bang integration issue.
Again, I offer to use the TAC to identify a path forward if that will be useful, but the issues identified in September still remain.
Conclusion
In many respects it is quite remarkable the work that has been accomplished – by both the Commission and the market – to put in place trade reporting, mandatory clearing, and now the first stages of swap exchange trading. However, the Commission process by which all of this was accomplished is certainly not to be replicated.
We need to continue to make sure we follow Congressional direction to protect end-users and focus more on outcomes rather than setting arbitrary timetables tied to an individual agenda. Rather than relying on the ad-hoc no-action process, the Commission should take responsibility of fixing the unworkable rules – swap data reporting and the swap dealer definition come to mind.
If we are going to impose rules, let’s make sure they are informed by data and will not interfere with the fundamental function of hedging and price discovery in the markets – I’m thinking about position limits and our proposed futures blocks.
Finally, let's keep an eye on the costs – putting these markets out of reach for commercial hedgers doesn't help anyone. Let's sharpen the pencil and consider all the options. There is no reason why we should not be able to quantify the solution as the most cost-effective rule for the market.
Thank you again for the opportunity to speak with you today.
1 See Sean Owens, Optimizing the Cost of Customization, Review of Futures Market (July 2012).
Keynote Address by Commissioner Scott D. O'Malia, Edison Electric Institute CFTC Compliance Forum, Washington, DC
October 17, 2013
The topic of today's conference is "Compliance and Implementation Issues." I must say such a topic gives us plenty of room to have a wide-ranging discussion, as there are so many questions and concerns regarding industry compliance and on-going implementation.
As we all know, the Dodd-Frank Act was enacted following the G-20 agreement in Pittsburgh in September 2009 to undertake comprehensive financial reform. The G-20 agreement proposed four main objectives of derivatives reform. First, report all data to a data repository. Second, require that all standardized derivatives contracts be exchange traded "as appropriate." Third, require clearing to be done through central counter parties. Fourth, impose higher collateral charges for all uncleared over-the-counter (OTC) products.
Since the passage of Dodd-Frank, the CFTC has been busy with an aggressive schedule of rule promulgation. Today we have finalized just over 60 rules including Dodd-Frank and non-Dodd Frank rule.
This new regulatory regime has had a profound impact on market structure as it has imposed new obligations, higher levels of transparency, and higher standards for risk management. Many of these new rules will have a positive impact on financial markets.
However, I have serious concerns about the Commission’s rule making process and schedule, as well as the statutory foundation of many rules and their overall impact on end-users.
Today, I would like to discuss three topics. First, I would like to address the implementation of the rules, both in terms of compliance already under way and what we need to think about going forward. Second, I would like to discuss the regulatory impact on end-users. Finally, I would like to discuss my concerns about the Commission’s preparedness to oversee the implementation of the Dodd-Frank regulatory regime.
The Process: Sacrificing Transparency and Certainty for Speed
From the beginning of my time at the Commission, I have been very concerned with the Commission's rulemaking process. As you may know, I have been disappointed with the Commission’s failure to develop a transparent rulemaking schedule that would enable market participants to plan for compliance with the massive new obligations imposed by these rules. In addition, I believe the Commission has rushed the rulemaking process, prioritizing getting rules done fast over getting them done right. This approach has compromised the legal soundness and consistency of our rules.
Stark evidence of the Commission’s flawed rules, and their unachievable compliance deadlines, can be seen in the massive number of exemptions and staff no-action letters issued to provide relief from them. To date, we have issued over 130 exemptions and staff no-action letters. That amounts to more than two exemptions for every rule passed. In nearly two dozen cases, the relief provided is for an indefinite period of time – thus making them de facto rulemakings, which didn't go through the Administrative Procedure Act or proper cost-benefit analysis. It is clear that the Commission has abused the no-action relief process.
Market participants are confused regarding the application of our rules, and how or when they must be applied. Further, since the Commission doesn't vote on staff no-action letters, they don't appear in the Federal Register. And you won't find the exemptive letters in our rulebook either. This lack of transparency and consistency will drive a compliance officer crazy.
One area where the Commission has made one of its biggest process fouls is the lack of robust cost-benefit analysis. Without a doubt, the comprehensive nature of the Dodd-Frank regulatory regime will have a significant cost impact on all market participants, and yet the Commission has failed to conduct appropriate and rigorous quantitative and qualitative analysis of our proposed rules. Understanding whether the benefits of the rules outweigh the costs is a common sense tool to determine the least burdensome solution to the problem.
The Commission has so far been able to get away with such inadequate cost-benefit analysis because the current governing statute sets a low bar. I support Congressional efforts to revise our statutory cost-benefit obligations in order to require the Commission to undertake a more rigorous quantitative and qualitative analysis, putting us on par with other federal agencies. I support Chairman Conaway's efforts (H.R. 1003) and hope the House and Senate will pass this legislation.
Implementation: What's Coming
While I have a longer list of process fouls committed by the Commission, I would like to turn to upcoming rules that will have a significant impact on end-users in particular.
The Commission is currently considering the position limit rule do-over. When I say the Commission, I mean that literally. During the shutdown there is no staff available to discuss this rule proposal. We can't make revisions. We can't ask questions about the rationale or justification. We can't even discuss with staff whether or not the proposed limits would have an appropriate impact to curb "excessive speculation."
The Commission is pursuing a dual track on position limits. Later this year, an appeals court will hear our argument urging it to overturn a federal district court’s ruling to vacate the original position limit rule. The district court found that the Commission failed to provide a finding of necessity as directed by the statute. Simultaneously, we are drafting a nearly identical rule arguing more strenuously that Congress made us do it, and that Congress really didn't want to know whether these rules are "necessary" or "appropriate."
Frankly, I find it interesting that the proposed rule will argue on one hand that Congress wanted position limits and that we aren't bound to apply an appropriateness standard – and then, on the other hand, argue in the cost-benefit analysis that these rules are well considered and will have the intended impact based on our analysis.
Another important rulemaking that will be before the Commission shortly is the application of capital and margin for all OTC trades. While I am pleased that the international community has worked together to make the standards consistent, make no mistake: these rules will increase the cost of hedging. End-users will be spared from mandatory margin exchange. However, nobody will receive a break from the new capital charges. These are new costs imposed on banks to offset the risk posed by OTC trades. Needless to say, these costs will be passed on to end-users.
I agree with Sean Owens, an economist with Woodbine Associates, who stated that under Dodd-Frank, "end users face a tradeoff between efficient, cost-effective risk transfer and the need for hedge customization. The cost implicit in this trade off include: regulatory capital, funding initial margin, market liquidity and structural factors."1
There is no doubt that these new requirements will have serious economic consequences for financial markets. And regulators should not take this lightly. In an effort to coordinate with international regulators, the Commission will re-propose its capital and margin rules. But even under the more accommodating margin requirements, the Commission must evaluate additional costs to end-users by conducting an in-depth cost-benefit analysis.
Happy Anniversary: 1st Anniversary of Futurization
It was one year ago, almost to the day, that the energy markets switched from trading swaps to futures. This huge shift was triggered by the then-impending effective date of the swap and swap dealer definitions. To avoid trading swaps and being caught in the unnecessary, costly and highly complex de minimis calculation imposed on swap dealers, energy firms shifted their trading from swaps to futures, literally overnight.
Based on the complexity of our swaps rules and the cost-efficiency of trading futures, it makes sense that participants would make this change. I'm interested to hear more from end-users like you how this shift has impacted your hedging strategies.
I must warn you that there are several more changes coming up that will continue to impact energy markets. First, the Commission is considering a draft futures block rule that will be proposed to limit the availability of block trades.
Second, as I noted before, OTC margin and capital rules will increase the cost of OTC bilateral deals. This draft rule should be published by the end of the year.
Third, the European Union (EU) is considering whether it will find acceptable the U.S. rules allowing a minimum one-day margin liquidation requirement for futures and swaps on energy products. Europe might not recognize U.S. centralized counterparties as qualified and, as a result, ban EU persons from accessing these markets. The EU is insisting on a two-day margin liquidation minimum. I am told that this would have the practical effect of increasing margin requirements for energy trades by 40 percent. I’m not sure how this will be resolved, but I suspect it will be closely tied to U.S. recognition of the European regulatory regime.
End-Users
Now let me turn to my second topic: how our rules treat end-users.
Congress was very clear about protecting end-users from Dodd-Frank's expansive regulatory reach. As a result, many end-users assumed that they wouldn't be impacted by these rules. Clearly, they are no longer under such misconceptions.
The swap dealer definition is a good example of how the Commission failed to accurately interpret Dodd-Frank and broadly applied the swap dealer definition to all market participants. The Commission ignored the express statutory mandate to exclude end-users from its reach. The swap dealer final rule requires entities to navigate through a complex set of factors on a trade-by-trade basis, rather than provide a bright line test. While I appreciate that the Commission set an $8 billion de minimis level to exclude trades from a dealer designation, it remains challenging to determine what is in and what is out from this safe harbor.
As part of the complexity of the swap dealer definition, the Commission has applied inconsistent and incoherent requirements around bona fide hedging as part of the dealer calculation. The hedge exclusion from the dealer definition applies only to physical, but not financial, transactions. The Commission should apply a consistent definition for hedging.
Another complexity that the Commission has imposed on end-users is the definition of a volumetric option. Specifically, to determine whether a volumetric option is a forward or a swap, the rule applies a seven-part test. But the real kicker is that under the seventh factor, contracts with embedded volumetric optionality may qualify for the forward contract exclusion only if exercise of the optionality is based on physical factors that are outside the control of the parties. This is in contradiction to how volumetric options have been traditionally used by market participants, makes no sense and provides absolutely no certainty for market participants.
The Commission has seemingly gone out of its way to create complex rules that generally result in an outcome of heads we win, tails you lose. We need to clean up the definition and create reliable and well-defined safe harbors. If we don't, I would encourage Congress to revisit the statute.
Commission Readiness: The Consequences of a “Ready, Fire, Aim” Approach
Let me move now to my third main topic: Commission readiness to properly oversee the implementation of its Dodd-Frank regulatory regime. There are two questions I have regarding this issue. The first question is pretty straightforward: is the Commission prepared to effectively oversee the new swaps markets? I believe the answer to this question is "no."
Take the area of registration. The Commission’s new swaps regime has created multiple new categories of Commission registrants, and in each category there has been an inconsistent and uncertain process with the bar constantly moving for applicants. For example, it has been ten months since the first swap dealer application arrived. Today, we have 89 temporarily registered applications totaling over 180,000 pages and we haven’t signed off on single application as complete or final.
With regard to swap data repository (SDR) registration, it has taken the Commission eight to ten months to register just three SDRs under temporary status. We have exceeded our own self-imposed limit of 180 days in some cases and we still haven’t issued a final SDR determination.
As for the registration of swap execution facilities (SEFs), while we have registered 18 entities under a temporary basis, I can only imagine how long it will take for a SEF to secure final approval, especially when we admit that we didn’t read the rulebooks in order to meet the arbitrary October 2 effective date. My guess is that it will be a long and painful process as we insist on evolving revisions to SEF rulebooks while trading is going on.
Another area where the Commission has not been adequately prepared to do its job is in connection with swap data being submitted under new reporting regulations. Despite imposing aggressive compliance requirements on the market, the Commission doesn't have the tools in place to effectively utilize the new data being reported to SDRs, and it doesn't have a surveillance system in either the futures or swaps market that I would regard as adequate or modern.
Today, the data we receive from SDRs requires extensive cleaning and changes to make it useful. As chairman of the Commission’s Technology Advisory Committee (TAC), I have devoted significant TAC attention and resources to aid this effort. Stemming from our TAC meeting in April, a working group including Commission staff and the SDRs has been established and is working to harmonize data fields to aid in our ability to easily aggregate and analyze data across SDR platforms. It will take time before we are able to access, aggregate and analyze data efficiently.
I am also disappointed with our current stance on the oversight of SEFs. Despite the October 2 start-up date for SEFs, the Commission relies on self-regulatory organizations to send data via Excel spreadsheet. There is no aggregation capacity and I am not aware of any plan to automate this process for the less than two thousand swap trades that occur on a daily basis.
My second question: is the Commission sufficiently familiar with the readiness of the market to adapt to our rules? The answer to this question is also "no." As I discussed earlier, evidence of this failure can be found in the Commission’s extensive use of no-action relief tied to arbitrary deadlines. The Commission needs to do a better job of understanding the significant compliance challenges facing market participants as a result of new regulations.
Pre-Trade Credit Checks: Time for the TAC to Revisit the Issue
Let me give you a brief example of one challenge we are dealing with today. The Commission has been working toward a goal of straight-through processing of trades and clearing to prevent any trade failures due to credit issues. Just recently, the Commission has started insisting that SEFs provide functionality to pre-check all trades for adequate credit at the futures commission merchant (FCM) to guarantee a trade. In general, I support this objective. However, market participants were not prepared to comply with this new requirement by October 2, the date SEFs began operation.
Consistent with the Commission’s practice of issuing last-minute ad-hoc relief, the day before the SEF start-up date, staff issued a delay of the pre-trade credit checks for one month until November 1. We are just two weeks away from this new deadline and it is clear that not all SEFs, FCMs, credit hubs and customers are fully interconnected. Without end-to-end fully tested connectivity, I suspect trades will continue to be done over the phone – stalling limit order book trading.
This is a topic that we discussed at the recent TAC meeting on September 12. It was clear at that meeting that the pieces were not in place and additional time is needed.
With the arbitrary November 1 deadline looming and the Commission yet to provide confused swap market participants with necessary guidance on a host of unresolved issues, often stemming from a lack of clarity in the SEF rules, I believe additional time is required. The Commission has not provided adequate time to complete the on-boarding process and conduct the technology testing and validation that is necessary. We should also consider phasing in participants, similar to our approach with clearing, in order to avoid a big bang integration issue.
Again, I offer to use the TAC to identify a path forward if that will be useful, but the issues identified in September still remain.
Conclusion
In many respects it is quite remarkable the work that has been accomplished – by both the Commission and the market – to put in place trade reporting, mandatory clearing, and now the first stages of swap exchange trading. However, the Commission process by which all of this was accomplished is certainly not to be replicated.
We need to continue to make sure we follow Congressional direction to protect end-users and focus more on outcomes rather than setting arbitrary timetables tied to an individual agenda. Rather than relying on the ad-hoc no-action process, the Commission should take responsibility of fixing the unworkable rules – swap data reporting and the swap dealer definition come to mind.
If we are going to impose rules, let’s make sure they are informed by data and will not interfere with the fundamental function of hedging and price discovery in the markets – I’m thinking about position limits and our proposed futures blocks.
Finally, let's keep an eye on the costs – putting these markets out of reach for commercial hedgers doesn't help anyone. Let's sharpen the pencil and consider all the options. There is no reason why we should not be able to quantify the solution as the most cost-effective rule for the market.
Thank you again for the opportunity to speak with you today.
1 See Sean Owens, Optimizing the Cost of Customization, Review of Futures Market (July 2012).
Thursday, October 24, 2013
COMPANY AND OWNER PLEAD GUILTY IN CASE INVOLVING RIGGING BIDS AT FORECLOSURE AUCTIONS
FROM: U.S. JUSTICE DEPARTMENT
GEORGIA REAL ESTATE INVESTMENT COMPANY AND OWNER PLEAD GUILTY TO CONSPIRACIES TO RIG BIDS AND COMMIT MAIL FRAUD FOR THE PURCHASE OF REAL ESTATE AT PUBLIC FORECLOSURE AUCTIONS
First Charges Filed in Georgia Real Estate Foreclosure Auctions Investigation
WASHINGTON — A Georgia real estate investor and his company pleaded guilty today for their role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.
Separate felony charges were filed on Sept. 25, 2013, in the U.S. District Court for the Northern District of Georgia in Atlanta, against Penguin Properties LLC and its owner, Seth D. Lynn.
According to court documents, from at least as early as Feb. 6, 2007 until at least Jan. 3, 2012, Penguin Properties and Lynn conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Fulton County, Ga. Penguin Properties and Lynn were also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Fulton County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.
Charges were also brought against Penguin Properties and Lynn for their involvement in similar conspiracies in DeKalb County, Ga., from at least as early as July 6, 2004 until at least Jan. 3, 2012.
“Today’s charges are the first to be filed in the state of Georgia in the Antitrust Division’s ongoing investigation into anticompetitive conduct in real estate foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division’s investigation has already resulted in dozens of guilty pleas in other states, and the division remains committed to eliminating anticompetitive practices at foreclosure auctions.”
The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Fulton and DeKalb County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.
“The core of this case was about an unlevel field and one of unfairness with regard to the auction/bidding process of foreclosed properties,” said Mark F. Giuliano, Special Agent in Charge of the FBI Atlanta Field Office. “The FBI remains committed in providing investigative resources to the U.S. Department of Justice’s Antitrust effort to address such matters.”
A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals and a $100 million fine for corporations. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for an individual, and a fine of $500,000 for a corporation. The respective maximum fines for the conspiracy to commit mail fraud charge may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.
The investigation is being conducted by Antitrust Division attorneys in Atlanta and the FBI’s Atlanta Division, with the assistance of the Atlanta Field Office of the Housing and Urban Development Office of Inspector General and the U.S. Attorney’s Office for the Northern District of Georgia. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should call 404-331-7113 or visit www.justice.gov/atr/contact/newcase.htm.
Today’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.
GEORGIA REAL ESTATE INVESTMENT COMPANY AND OWNER PLEAD GUILTY TO CONSPIRACIES TO RIG BIDS AND COMMIT MAIL FRAUD FOR THE PURCHASE OF REAL ESTATE AT PUBLIC FORECLOSURE AUCTIONS
First Charges Filed in Georgia Real Estate Foreclosure Auctions Investigation
WASHINGTON — A Georgia real estate investor and his company pleaded guilty today for their role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.
Separate felony charges were filed on Sept. 25, 2013, in the U.S. District Court for the Northern District of Georgia in Atlanta, against Penguin Properties LLC and its owner, Seth D. Lynn.
According to court documents, from at least as early as Feb. 6, 2007 until at least Jan. 3, 2012, Penguin Properties and Lynn conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Fulton County, Ga. Penguin Properties and Lynn were also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Fulton County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.
Charges were also brought against Penguin Properties and Lynn for their involvement in similar conspiracies in DeKalb County, Ga., from at least as early as July 6, 2004 until at least Jan. 3, 2012.
“Today’s charges are the first to be filed in the state of Georgia in the Antitrust Division’s ongoing investigation into anticompetitive conduct in real estate foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division’s investigation has already resulted in dozens of guilty pleas in other states, and the division remains committed to eliminating anticompetitive practices at foreclosure auctions.”
The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Fulton and DeKalb County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.
“The core of this case was about an unlevel field and one of unfairness with regard to the auction/bidding process of foreclosed properties,” said Mark F. Giuliano, Special Agent in Charge of the FBI Atlanta Field Office. “The FBI remains committed in providing investigative resources to the U.S. Department of Justice’s Antitrust effort to address such matters.”
A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals and a $100 million fine for corporations. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for an individual, and a fine of $500,000 for a corporation. The respective maximum fines for the conspiracy to commit mail fraud charge may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.
The investigation is being conducted by Antitrust Division attorneys in Atlanta and the FBI’s Atlanta Division, with the assistance of the Atlanta Field Office of the Housing and Urban Development Office of Inspector General and the U.S. Attorney’s Office for the Northern District of Georgia. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should call 404-331-7113 or visit www.justice.gov/atr/contact/newcase.htm.
Today’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.
Wednesday, October 23, 2013
CFTC COMMISSIONER CHILTON'S SPEECH TO THE AMERICAN GAS ASSOCIATION CONFERENCE
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
“Special Purpose”
Speech by Commissioner Bart Chilton to the American Gas Association/Annual Energy Market Regulation Conference, New York, NY
October 3, 2013
Introduction
Good morning. Thanks for the invitation to be with you today. I used to work in the same building that houses your office in D.C., in the Hall of States. You must be the signature tenant there because every morning walking through the lobby I saw those big silver letters on the wall spelling out “American Gas Association.” As a Commissioner, I’ve learned a lot more about you than your name and have seen the remarkable work you do in the energy industry. So, it really is good to be here.
Maybe I'm just another speaker at another conference ... a vehicle with which to get to the next break. Or, perhaps it is not a coincidence that we are here together. Maybe it isn’t happenstance. Maybe there is a reason not yet known. So, we’re here for this little ride—whatever happens in these next few minutes. Perhaps there is something you, or I, are supposed to remember about what we discuss. Sometimes a discussion or dialogue may trigger bits of awesome. Or, it might not even be something that is said, but a feeling or emotion, an instinct or an inclination to do this or that, or to not do this or that. Something even seemingly small might alter or change things up. It might be something important only to you or your family, or perhaps your coworkers or it could be of monumental significance. Who knows? I won't presume to know the true reason we might be here. Maybe it is just a stop between point A and point B. It probably is close to Bloody Mary:30 for some folks.
I'm gonna ask your indulgence for the next few minutes, for our talk today, right here and now ... I'm gonna ask you to do me a solid. It may be very worthwhile. We'll see. Let's try something together. Let's all assume we have a special purpose (not a special purpose like in The Jerk, "Wait a minute, what's happening to my special purpose?) But that you have a true purpose—perhaps unknown—in being here. Every day, even a day as mundane as October 3rd, has a special purpose. Let's just try it. C'mon, it'll be an adventure. Okay? Ready, go.
October 3rd
Look at it this way: you never know what might happen on a day like today. On this day, in 1951 right here in this city “The Shot Heard ‘Round the World” occurred. Remember what that was? Any baseball fans here? Yep. That’s the day the New York Giants’ Bobby Thomson hit a game-winning homerun in the bottom of the 9th to beat the Brooklyn Dodgers and win the pennant.
And given that I come here from D.C. and given what’s going on in the capitol city these days, it’s also appropriate to mention that on this day in 1955 the Mickey Mouse Club debuted on ABC. On this day, that same year, Captain Kangaroo premiered on CBS. Both shows had the special purpose of educating and entertaining children. Oh, and anybody like buffalo wings? On this day, in 1964, they were first made in where? Buffalo, New York at the Anchor Bar.
But, it was also on this day—five years ago today that President Bush signed the Emergency Economic Stabilization Act of 2008 to try to keep Wall Street titans from tumbling and taking the whole economy down with them. And yes, that’s the $700 billion dollar bailout we’re talking about.
FCIC
Whether you agreed with that bailout or not, it’s important to have a look at history. How many of you have heard of the Financial Crisis Inquiry Commission—the FCIC? It was set up by Congress for the very special purpose of looking back to figure out how we got into the economic fiasco that started in ’07 and ‘08. The FCIC website asks the question: “How did it come to pass that in 2008 our nation was forced to choose between two stark and painful alternatives—either risk the collapse of our financial system and economy, or commit trillions of taxpayer dollars to rescue major corporations and our financial markets, as millions of Americans still lost their jobs, their savings and their homes?”
That was their mission. They noted widespread failures in financial regulation and excessive borrowing and risk-taking by Wall Street. So regulators, after a decade of regulation-gutting, didn’t have the tools to crack down when they needed to and were instead spectators to the spectacle like everybody else. The captains of Wall Street were cruising their ships along at full throttle and there was no governor to slow them down.
As a result, though, Congress passed and President Obama signed into law, the most sweeping set of financial reforms in our history—the Dodd-Frank Wall Street Reform and Consumer Protection Act. (By the way, today—October 3rd is the Obamas’ anniversary—a pretty special day with a purpose for the first couple.) But, Dodd-Frank was necessary if we were ever going to protect ourselves from the kind of financial meltdown that occurred in 2008. It had a special purpose. It’s bringing transparency to the once dark over-the-counter (OTC) markets where complex and crazy deals went on—the very things that caused the collapse and calamity.
Bloomingdale’s
Here’s another bit of history for ‘ya. On this day, in 1872, in this city, the Bloomingdale brothers opened their first store. What does that have to do with anything? Well, I bring it up because they seized on a new concept—the department store—and took off like gangbusters all because of selling hoop skirts—hoop skirts! Today, it’s a massive company with more than 40 huge, high-end department stores and it’s a Fortune 100 company.
Well, in markets we have some players who are seizing on new concepts for special purposes. Let’s talk about a couple of them. And, like Bloomingdale’s, the first one is massive.
Massive Passives
First, we have seen a “financialization” of commodity markets by a group of traders I call Massive Passives. Portfolio diversification was the rage in the middle of the last decade and investors sought out the derivatives world and dumped roughly $200 billion into U.S. regulated futures markets.
Say a pension fund wanted to diversify into commodities; there’s nothing wrong with that from my perspective. Nevertheless, the type of trading activity they undertake is different than what speculators have typically done. Instead of getting in and out of markets these massive funds—pension funds, some hedge funds, exchange traded funds (ETFs), and the like—buy and hold their market positions. So they are both massive in size, and fairly passive in their trading strategy. Massive Passives. Like Bloomingdale’s, they are a relatively new concept.
But, here’s the trouble: too much concentration in markets can influence and contribute to price abnormalities. Heck, just one massive passive can impact price if it’s large enough.
Take 2008, when crude went from right around $99 at the beginning of the year to more than $145 in July, then all the way back to $31 in December. All of that took place without much change in supply or demand, right? I am far from convinced that Massive Passives had no role in that market distortion, as some others seem to think.
Congress got worried about these guys too and included in the Dodd-Frank Act a provision for speculative position limits. Those limits would ensure that regulators have the ability to stave off excessive speculation in markets.
To date, the limits aren’t in place. There’s fierce opposition out there and big speculators with a lot of money and lawyers are taking us on. But I expect that later this month we’ll put out a proposal for a new position limits rule. You may have heard that our first one was thrown out by a court that sided with the speculators. We’re appealing. So, new rule and an appeal. One way or another, I hope we will have position limits soon so that we can avoid the wild energy price swings like we saw in 2008.
By the way, if the CFTC fails to enact limits by the end of the year, I think Congress should simply take our rule that we will soon either propose or consider, and put it into the reauthorization of the Agency. There has not been the advocacy or interest in getting this done at the Agency like Congress and the President instructed. If we can’t do it, and it remains unclear if we can, Congress should do it for us.
A Brief Primer on Technology
Now, here’s something else that’s new in markets, another relatively innovative concept. On this day in 1985, the space shuttle Atlantis made its maiden flight. Isn’t technology wonderful? Who would have thought we’d have an international space station someday and the technology to transport astronauts there and back?
The same goes for markets. Even ten years ago, who would have guessed we’d be trading in milliseconds and conducting tens of millions of trades a day?
It’s about a thousand miles from New York to Chicago. An article a while back in the Financial Times pointed out that communications cables laid between the two cities meant that a message could be delivered in 14.5 milliseconds—70 round trips per second. Now that’s fast. But not fast enough for some who use those cables to trade commodities—the high-frequency traders I call cheetahs because of their lightning speed. It’s been reported that at least one company has cut that time down to 13.1 milliseconds and that microwave capability could get it under 10 milliseconds. Chipping away at those milliseconds is being done for a very special purpose, to gain a competitive advantage in markets.
Here’s some data that’s hard to get your head around, too. Over the last year, we at CFTC analyzed 20 million trading seconds. Of those 20 million, we pinpointed 189,000 seconds, primarily around the open and close of markets. In those 189,000 seconds we found something astounding: Cheetahs traded at rates of 100 to 500 trades per second in a major commodity market!
But these cats can be dangerous. By the way, on this day in 2003, Roy Horn of Siegfried and Roy was injured by a tiger during a show in Las Vegas. Fortunately, he recovered and ironically, it’s his birthday today, October 3rd.
So yes, these cats are dangerous. A study late last year, which was conducted in conjunction with the CFTC, said in essence that cheetah trading imposes quantifiable costs. Aggressive cheetahs make a lot of money, and they make the most when they trade with small, traditional traders. A cheetah trading with a fundamental trader—like maybe some of you are—makes $1.92 on a $50,000 trade, but if that same trade is made with a small trader, the number goes up to $3.49.
But that’s not the only issue. There’s also a concern about “wash” trading, where cheetahs (and sometimes others) trade with themselves. They make a bid or offer and they hit it themself. Sometimes it happens innocently enough. Two traders on different sides of the same trading floor may hit each other. But, it happens too much to all be accidental. By putting a price out and hitting it yourself, you’re not taking any risk but you create the impression that a legitimate trade has occurred. If that is the special purpose, it’s a problem. That entices others to get into markets before they realize the liquidity isn’t real and the markets may move in a direction that artificially aids that cheetah’s bottom line. Wash trading is not only wrong; it is illegal. That’s because it’s unfair to other traders, and it can impact price discovery which is unfair to consumers.
Wash blocker technology is available and I’ve called on the exchanges to get it put in place so we don’t have this potentially market-moving fantasy liquidity.
Let Banks Be Banks
So those are two examples of how our markets are changing and how new players have entered the fold. Now, let’s talk about more traditional market participants and how they too are changing up our financial world.
Did you know that today is a bank holiday in Germany? See how many things you’re learning about this special day. It has a special purpose. On this day, in 1990, East and West unified. It is German reunification Day. Thus, it’s a bank holiday.
Now watch this transition: let’s talk about banks! Specifically, let’s discuss what the large investment banks have been able to do for the last decade as a result of amendments to the Bank Holding Company Act (of 1956). That law was put in place to prevent excessive concentration of financial and economic power. But that’s not the way it is today. Banks can now be involved in activities that are obviously not “financial.”
Big banks today are into all sorts of other businesses: commodities, warehousing of commodities, and even the delivery mechanisms associated with those commodities. At the same time, they are heavily involved in the actual trading of the commodities. What worries me is that they may have the capacity to influence prices through the related business ownership. They own a warehouse. They can charge storage. They can impact delivery, and they can trade the commodities.
Of course the prices of commodities are supposed to be based upon supply and demand. However, what if you control the supply or the demand? Seems like perhaps—I don’t know—maybe there’s a conflict of interest there? Certainly there’s the potential for a conflict.
This policy is really part of that Decade of Deregulation I talked about before that led us to the brink in 2008. Like then, this bank ownership issue is getting dangerous in my opinion.
For me, it’s simple: banks should get back to the special purpose of … banking. However, for those who want to consider the policy merits of the matter in more detail, the first thing they might wanna do is get all of the ownership information. What do the banks own?
Well, it isn’t that easy to find. It seems like the information is something that the public should be able to easily locate and click on a link to find out. After all, the large investment banks have access to cheap money at the Fed window and for no other reason than that they need to be transparent.
And whose fault is this? Yep—policymakers. See, starting in 2003, the Federal Reserve Board began issuing orders for banks that essentially allowed them to participate in commodity trading activity and actually deal in physical commodities at the same time.
Prior to that, two “special” large banks got some extraordinary treatment in the Gramm-Leach-Bliley Financial Services Modernization Act of 1999. There is a provision in that Act, the effect of which exempted them from the bank ownership prohibitions.
I’m cool with banks making boatloads of cash, just not owning the boats; and in some cases they do, in the form of—gas people, help me out here: that’s right, oil tankers. They should make their profits through what they know and what they have done in the past … banking. That’s their special purpose. The banks built communities. Let’s help them do that again. Get back to making loans, helping to create jobs and assist in restoring our economy. Congress should not only do away with the statutory exemption that has been used by those two big banks, but also do away with the ability of the Fed to allow any commodity-related ownership by the banks whatsoever.
Whistling Away
One last topic. On this day, in 1913, the federal income tax law was signed—with a one-percent rate. Since that time, the government has closed several times. Here we are again. I mentioned the Mickey Mouse Club earlier. I would hate to compare our government to the Club, heck I’m part of it, but D.C. sure has had some Mickey Mouse challenges in recent days. It’s Goofy! And, it has created a crisis in and of itself.
I call it a crisis because of all the things I’ve already talked about that need the full attention of regulators, be it Massive Passives, cheetahs, banks or all the day-to-day oversight and enforcement functions we play. Our agency needs to be at one-hundred-percent or the crooks are gonna get away. We wouldn’t be able to track guys who were trading champagne and kickbacks for market manipulation like we did last week in the case of ICAP. That’s why I’ve written to members of Congress asking them to consider allowing us the emergency and temporary use of our whistleblower and education fund during shutdowns. Our agency shouldn’t be shut down or crippled for even a day because of funding. We shouldn’t take our cops off the beat.
Oh, and speaking of whistling; here’s another one: On this day, in 1960, the Andy Griffith Show started on CBS. Remember the theme song and the whistling? And, in Washington, folks need to stop whistling away and work together on things like the budget and the debt ceiling.
Conclusion
So you see, you never know what’s gonna happen on any given day. Will someone hit a homerun in the bottom of the ninth today? Will any new TV shows premiere tonight? (I’d be willing to bet it’ll be a reality show if it happens.)
I had a special purpose in coming here today: to discuss with you some important topics that affect you and your great association every day. Every day has a special purpose. What will yours be today as an individual and an association? I appreciate you letting me carry out my special purpose by inviting me here. Thank you and happy October 3rd.
“Special Purpose”
Speech by Commissioner Bart Chilton to the American Gas Association/Annual Energy Market Regulation Conference, New York, NY
October 3, 2013
Introduction
Good morning. Thanks for the invitation to be with you today. I used to work in the same building that houses your office in D.C., in the Hall of States. You must be the signature tenant there because every morning walking through the lobby I saw those big silver letters on the wall spelling out “American Gas Association.” As a Commissioner, I’ve learned a lot more about you than your name and have seen the remarkable work you do in the energy industry. So, it really is good to be here.
Maybe I'm just another speaker at another conference ... a vehicle with which to get to the next break. Or, perhaps it is not a coincidence that we are here together. Maybe it isn’t happenstance. Maybe there is a reason not yet known. So, we’re here for this little ride—whatever happens in these next few minutes. Perhaps there is something you, or I, are supposed to remember about what we discuss. Sometimes a discussion or dialogue may trigger bits of awesome. Or, it might not even be something that is said, but a feeling or emotion, an instinct or an inclination to do this or that, or to not do this or that. Something even seemingly small might alter or change things up. It might be something important only to you or your family, or perhaps your coworkers or it could be of monumental significance. Who knows? I won't presume to know the true reason we might be here. Maybe it is just a stop between point A and point B. It probably is close to Bloody Mary:30 for some folks.
I'm gonna ask your indulgence for the next few minutes, for our talk today, right here and now ... I'm gonna ask you to do me a solid. It may be very worthwhile. We'll see. Let's try something together. Let's all assume we have a special purpose (not a special purpose like in The Jerk, "Wait a minute, what's happening to my special purpose?) But that you have a true purpose—perhaps unknown—in being here. Every day, even a day as mundane as October 3rd, has a special purpose. Let's just try it. C'mon, it'll be an adventure. Okay? Ready, go.
October 3rd
Look at it this way: you never know what might happen on a day like today. On this day, in 1951 right here in this city “The Shot Heard ‘Round the World” occurred. Remember what that was? Any baseball fans here? Yep. That’s the day the New York Giants’ Bobby Thomson hit a game-winning homerun in the bottom of the 9th to beat the Brooklyn Dodgers and win the pennant.
And given that I come here from D.C. and given what’s going on in the capitol city these days, it’s also appropriate to mention that on this day in 1955 the Mickey Mouse Club debuted on ABC. On this day, that same year, Captain Kangaroo premiered on CBS. Both shows had the special purpose of educating and entertaining children. Oh, and anybody like buffalo wings? On this day, in 1964, they were first made in where? Buffalo, New York at the Anchor Bar.
But, it was also on this day—five years ago today that President Bush signed the Emergency Economic Stabilization Act of 2008 to try to keep Wall Street titans from tumbling and taking the whole economy down with them. And yes, that’s the $700 billion dollar bailout we’re talking about.
FCIC
Whether you agreed with that bailout or not, it’s important to have a look at history. How many of you have heard of the Financial Crisis Inquiry Commission—the FCIC? It was set up by Congress for the very special purpose of looking back to figure out how we got into the economic fiasco that started in ’07 and ‘08. The FCIC website asks the question: “How did it come to pass that in 2008 our nation was forced to choose between two stark and painful alternatives—either risk the collapse of our financial system and economy, or commit trillions of taxpayer dollars to rescue major corporations and our financial markets, as millions of Americans still lost their jobs, their savings and their homes?”
That was their mission. They noted widespread failures in financial regulation and excessive borrowing and risk-taking by Wall Street. So regulators, after a decade of regulation-gutting, didn’t have the tools to crack down when they needed to and were instead spectators to the spectacle like everybody else. The captains of Wall Street were cruising their ships along at full throttle and there was no governor to slow them down.
As a result, though, Congress passed and President Obama signed into law, the most sweeping set of financial reforms in our history—the Dodd-Frank Wall Street Reform and Consumer Protection Act. (By the way, today—October 3rd is the Obamas’ anniversary—a pretty special day with a purpose for the first couple.) But, Dodd-Frank was necessary if we were ever going to protect ourselves from the kind of financial meltdown that occurred in 2008. It had a special purpose. It’s bringing transparency to the once dark over-the-counter (OTC) markets where complex and crazy deals went on—the very things that caused the collapse and calamity.
Bloomingdale’s
Here’s another bit of history for ‘ya. On this day, in 1872, in this city, the Bloomingdale brothers opened their first store. What does that have to do with anything? Well, I bring it up because they seized on a new concept—the department store—and took off like gangbusters all because of selling hoop skirts—hoop skirts! Today, it’s a massive company with more than 40 huge, high-end department stores and it’s a Fortune 100 company.
Well, in markets we have some players who are seizing on new concepts for special purposes. Let’s talk about a couple of them. And, like Bloomingdale’s, the first one is massive.
Massive Passives
First, we have seen a “financialization” of commodity markets by a group of traders I call Massive Passives. Portfolio diversification was the rage in the middle of the last decade and investors sought out the derivatives world and dumped roughly $200 billion into U.S. regulated futures markets.
Say a pension fund wanted to diversify into commodities; there’s nothing wrong with that from my perspective. Nevertheless, the type of trading activity they undertake is different than what speculators have typically done. Instead of getting in and out of markets these massive funds—pension funds, some hedge funds, exchange traded funds (ETFs), and the like—buy and hold their market positions. So they are both massive in size, and fairly passive in their trading strategy. Massive Passives. Like Bloomingdale’s, they are a relatively new concept.
But, here’s the trouble: too much concentration in markets can influence and contribute to price abnormalities. Heck, just one massive passive can impact price if it’s large enough.
Take 2008, when crude went from right around $99 at the beginning of the year to more than $145 in July, then all the way back to $31 in December. All of that took place without much change in supply or demand, right? I am far from convinced that Massive Passives had no role in that market distortion, as some others seem to think.
Congress got worried about these guys too and included in the Dodd-Frank Act a provision for speculative position limits. Those limits would ensure that regulators have the ability to stave off excessive speculation in markets.
To date, the limits aren’t in place. There’s fierce opposition out there and big speculators with a lot of money and lawyers are taking us on. But I expect that later this month we’ll put out a proposal for a new position limits rule. You may have heard that our first one was thrown out by a court that sided with the speculators. We’re appealing. So, new rule and an appeal. One way or another, I hope we will have position limits soon so that we can avoid the wild energy price swings like we saw in 2008.
By the way, if the CFTC fails to enact limits by the end of the year, I think Congress should simply take our rule that we will soon either propose or consider, and put it into the reauthorization of the Agency. There has not been the advocacy or interest in getting this done at the Agency like Congress and the President instructed. If we can’t do it, and it remains unclear if we can, Congress should do it for us.
A Brief Primer on Technology
Now, here’s something else that’s new in markets, another relatively innovative concept. On this day in 1985, the space shuttle Atlantis made its maiden flight. Isn’t technology wonderful? Who would have thought we’d have an international space station someday and the technology to transport astronauts there and back?
The same goes for markets. Even ten years ago, who would have guessed we’d be trading in milliseconds and conducting tens of millions of trades a day?
It’s about a thousand miles from New York to Chicago. An article a while back in the Financial Times pointed out that communications cables laid between the two cities meant that a message could be delivered in 14.5 milliseconds—70 round trips per second. Now that’s fast. But not fast enough for some who use those cables to trade commodities—the high-frequency traders I call cheetahs because of their lightning speed. It’s been reported that at least one company has cut that time down to 13.1 milliseconds and that microwave capability could get it under 10 milliseconds. Chipping away at those milliseconds is being done for a very special purpose, to gain a competitive advantage in markets.
Here’s some data that’s hard to get your head around, too. Over the last year, we at CFTC analyzed 20 million trading seconds. Of those 20 million, we pinpointed 189,000 seconds, primarily around the open and close of markets. In those 189,000 seconds we found something astounding: Cheetahs traded at rates of 100 to 500 trades per second in a major commodity market!
But these cats can be dangerous. By the way, on this day in 2003, Roy Horn of Siegfried and Roy was injured by a tiger during a show in Las Vegas. Fortunately, he recovered and ironically, it’s his birthday today, October 3rd.
So yes, these cats are dangerous. A study late last year, which was conducted in conjunction with the CFTC, said in essence that cheetah trading imposes quantifiable costs. Aggressive cheetahs make a lot of money, and they make the most when they trade with small, traditional traders. A cheetah trading with a fundamental trader—like maybe some of you are—makes $1.92 on a $50,000 trade, but if that same trade is made with a small trader, the number goes up to $3.49.
But that’s not the only issue. There’s also a concern about “wash” trading, where cheetahs (and sometimes others) trade with themselves. They make a bid or offer and they hit it themself. Sometimes it happens innocently enough. Two traders on different sides of the same trading floor may hit each other. But, it happens too much to all be accidental. By putting a price out and hitting it yourself, you’re not taking any risk but you create the impression that a legitimate trade has occurred. If that is the special purpose, it’s a problem. That entices others to get into markets before they realize the liquidity isn’t real and the markets may move in a direction that artificially aids that cheetah’s bottom line. Wash trading is not only wrong; it is illegal. That’s because it’s unfair to other traders, and it can impact price discovery which is unfair to consumers.
Wash blocker technology is available and I’ve called on the exchanges to get it put in place so we don’t have this potentially market-moving fantasy liquidity.
Let Banks Be Banks
So those are two examples of how our markets are changing and how new players have entered the fold. Now, let’s talk about more traditional market participants and how they too are changing up our financial world.
Did you know that today is a bank holiday in Germany? See how many things you’re learning about this special day. It has a special purpose. On this day, in 1990, East and West unified. It is German reunification Day. Thus, it’s a bank holiday.
Now watch this transition: let’s talk about banks! Specifically, let’s discuss what the large investment banks have been able to do for the last decade as a result of amendments to the Bank Holding Company Act (of 1956). That law was put in place to prevent excessive concentration of financial and economic power. But that’s not the way it is today. Banks can now be involved in activities that are obviously not “financial.”
Big banks today are into all sorts of other businesses: commodities, warehousing of commodities, and even the delivery mechanisms associated with those commodities. At the same time, they are heavily involved in the actual trading of the commodities. What worries me is that they may have the capacity to influence prices through the related business ownership. They own a warehouse. They can charge storage. They can impact delivery, and they can trade the commodities.
Of course the prices of commodities are supposed to be based upon supply and demand. However, what if you control the supply or the demand? Seems like perhaps—I don’t know—maybe there’s a conflict of interest there? Certainly there’s the potential for a conflict.
This policy is really part of that Decade of Deregulation I talked about before that led us to the brink in 2008. Like then, this bank ownership issue is getting dangerous in my opinion.
For me, it’s simple: banks should get back to the special purpose of … banking. However, for those who want to consider the policy merits of the matter in more detail, the first thing they might wanna do is get all of the ownership information. What do the banks own?
Well, it isn’t that easy to find. It seems like the information is something that the public should be able to easily locate and click on a link to find out. After all, the large investment banks have access to cheap money at the Fed window and for no other reason than that they need to be transparent.
And whose fault is this? Yep—policymakers. See, starting in 2003, the Federal Reserve Board began issuing orders for banks that essentially allowed them to participate in commodity trading activity and actually deal in physical commodities at the same time.
Prior to that, two “special” large banks got some extraordinary treatment in the Gramm-Leach-Bliley Financial Services Modernization Act of 1999. There is a provision in that Act, the effect of which exempted them from the bank ownership prohibitions.
I’m cool with banks making boatloads of cash, just not owning the boats; and in some cases they do, in the form of—gas people, help me out here: that’s right, oil tankers. They should make their profits through what they know and what they have done in the past … banking. That’s their special purpose. The banks built communities. Let’s help them do that again. Get back to making loans, helping to create jobs and assist in restoring our economy. Congress should not only do away with the statutory exemption that has been used by those two big banks, but also do away with the ability of the Fed to allow any commodity-related ownership by the banks whatsoever.
Whistling Away
One last topic. On this day, in 1913, the federal income tax law was signed—with a one-percent rate. Since that time, the government has closed several times. Here we are again. I mentioned the Mickey Mouse Club earlier. I would hate to compare our government to the Club, heck I’m part of it, but D.C. sure has had some Mickey Mouse challenges in recent days. It’s Goofy! And, it has created a crisis in and of itself.
I call it a crisis because of all the things I’ve already talked about that need the full attention of regulators, be it Massive Passives, cheetahs, banks or all the day-to-day oversight and enforcement functions we play. Our agency needs to be at one-hundred-percent or the crooks are gonna get away. We wouldn’t be able to track guys who were trading champagne and kickbacks for market manipulation like we did last week in the case of ICAP. That’s why I’ve written to members of Congress asking them to consider allowing us the emergency and temporary use of our whistleblower and education fund during shutdowns. Our agency shouldn’t be shut down or crippled for even a day because of funding. We shouldn’t take our cops off the beat.
Oh, and speaking of whistling; here’s another one: On this day, in 1960, the Andy Griffith Show started on CBS. Remember the theme song and the whistling? And, in Washington, folks need to stop whistling away and work together on things like the budget and the debt ceiling.
Conclusion
So you see, you never know what’s gonna happen on any given day. Will someone hit a homerun in the bottom of the ninth today? Will any new TV shows premiere tonight? (I’d be willing to bet it’ll be a reality show if it happens.)
I had a special purpose in coming here today: to discuss with you some important topics that affect you and your great association every day. Every day has a special purpose. What will yours be today as an individual and an association? I appreciate you letting me carry out my special purpose by inviting me here. Thank you and happy October 3rd.
Monday, October 21, 2013
SEC FILES FRAUD CHARGES AGAINST CHINA-BASED CHICKEN PROVIDER
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Files Fraud Charges Against Yuhe International, Inc., and Its CEO
The Securities and Exchange Commission today announced a filing of fraud and related charges against Yuhe International, Inc. ("Yuhe"), a China-based provider of broiler chickens, and its Chief Executive Officer, Gao Zhentao ("Gao").
The Commission's complaint alleges that Yuhe, under Gao's direction and control, made false public statements concerning an acquisition Yuhe claimed to have executed in 2009. Specifically, the complaint alleges that between approximately December 2009 and June 2011, Yuhe misled its public investors by disseminating a series of materially false statements concerning a purported acquisition of additional chicken farms for more than $15 million, often providing updates concerning the farms' integration and contribution to the company's revenue. In October 2010, Yuhe completed a public offering in the United States, selling more than four million shares of its common stock and generating net proceeds in excess of $27 million. The complaint alleges that, in truth, the acquisition never occurred, a fact that was admitted by Yuhe during an investor conference call in June 2011 and a subsequent filing on Form 8-K on June 23, 2011.
The complaint alleges that Yuhe violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 14a-3, and 14a-9, thereunder. The complaint further alleges that Gao violated Section 17(a) of the Securities Act, Sections 10(b), 13(b)(5), and 14(a) of the Exchange Act, and Rules 10b-5, 13a-14, 13b2-1, 14a-3, and 14a-9, thereunder, and aided and abetted Yuhe's violations of Section 17(a) of the Securities Act, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 14a-3, and 14a-9, thereunder. The Commission's complaint seeks permanent injunctions, civil penalties, disgorgement plus prejudgment interest, an officer and director bar against Gao, and other relief.
SEC Files Fraud Charges Against Yuhe International, Inc., and Its CEO
The Securities and Exchange Commission today announced a filing of fraud and related charges against Yuhe International, Inc. ("Yuhe"), a China-based provider of broiler chickens, and its Chief Executive Officer, Gao Zhentao ("Gao").
The Commission's complaint alleges that Yuhe, under Gao's direction and control, made false public statements concerning an acquisition Yuhe claimed to have executed in 2009. Specifically, the complaint alleges that between approximately December 2009 and June 2011, Yuhe misled its public investors by disseminating a series of materially false statements concerning a purported acquisition of additional chicken farms for more than $15 million, often providing updates concerning the farms' integration and contribution to the company's revenue. In October 2010, Yuhe completed a public offering in the United States, selling more than four million shares of its common stock and generating net proceeds in excess of $27 million. The complaint alleges that, in truth, the acquisition never occurred, a fact that was admitted by Yuhe during an investor conference call in June 2011 and a subsequent filing on Form 8-K on June 23, 2011.
The complaint alleges that Yuhe violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 14a-3, and 14a-9, thereunder. The complaint further alleges that Gao violated Section 17(a) of the Securities Act, Sections 10(b), 13(b)(5), and 14(a) of the Exchange Act, and Rules 10b-5, 13a-14, 13b2-1, 14a-3, and 14a-9, thereunder, and aided and abetted Yuhe's violations of Section 17(a) of the Securities Act, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 14a-3, and 14a-9, thereunder. The Commission's complaint seeks permanent injunctions, civil penalties, disgorgement plus prejudgment interest, an officer and director bar against Gao, and other relief.
Sunday, October 20, 2013
CONSUMERS HARMED BY 'FREE GAS FOR LIFE' SCAM RECEIVE NEARLY $2 MILLION FROM FTC
FROM: FEDERAL TRADE COMMISSION
FTC Returns Almost $2 Million to Consumers Harmed by 'Free Gas for Life' Scam
The Federal Trade Commission is mailing 58,234 refund checks to consumers who lost money to Green Millionaire, an online scam whose “free” book explained how to power cars and homes at no cost, and then billed them for an online magazine they never ordered.
More than $1.9 million is being returned to consumers, about 54 percent of consumers’ total estimated loss. Each person will receive an average amount of about $33.88, based upon the amount of individual loss divided pro-rata. Those who receive the checks from the FTC’s refund administrator should cash them within 60 days of the mailing date. The FTC never requires consumers to pay money or to provide information before refund checks can be cashed.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
FTC Returns Almost $2 Million to Consumers Harmed by 'Free Gas for Life' Scam
The Federal Trade Commission is mailing 58,234 refund checks to consumers who lost money to Green Millionaire, an online scam whose “free” book explained how to power cars and homes at no cost, and then billed them for an online magazine they never ordered.
More than $1.9 million is being returned to consumers, about 54 percent of consumers’ total estimated loss. Each person will receive an average amount of about $33.88, based upon the amount of individual loss divided pro-rata. Those who receive the checks from the FTC’s refund administrator should cash them within 60 days of the mailing date. The FTC never requires consumers to pay money or to provide information before refund checks can be cashed.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
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