As one whose experience in the law governing commodity futures goes back to my time as the young General Counsel and Staff Director of the Senate Agriuculture Committee, I have been quite disappointed in the inactivity during the CFTC’s OptionSellers/INT FCStone debacle.

As the young staffer of the Senate Committee, I drafted the law establishing the CFTC in 1974. After having my savings wiped out in the current scandal, I have been astounded by their failure to act.  The only branch of government I have heard from is the Federal Bureau of Investigation. One month after the crash of OptionSellers I received a letter from a Victims Specialist of the FBI, DOJ .The letter said I had been identified as the victim of a financial crime.

This failure to act to fill its duty under the law is a quite different from its actions against INT FCStone in 2008 and 2009. Below is their press release

“ Washington, DC - The Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against FCStone LLC, a Futures Commission Merchant (FCM) headquartered in New York, New York, for failing to diligently supervise its officers and employees relating to its business as an FCM in violation of Commission Regulation 166.3, 17 C.F.R. § 166.3 (2008). FCStone failed to implement adequate customer credit and concentration risk policies and controls in 2008 and part of 2009, allowing one account (Account) to acquire a massive options position that it could not afford to maintain. Ultimately, FCStone was forced to take over the Account, and lost approximately $127 million. The CFTC Order requires FCStone to pay a civil monetary penalty of $1.5 million, retain an independent consultant to review its internal controls and procedures, and cease and desist from violating its supervisory obligations.”

This is very much the same thing that thing that happened in the current scandal. The only thing that is different is that this time INT FCStone is trying to avoid paying  for their own losses. They have claimed that these huge losses are solely the responsibilities of innocent investors.

It is hoped that the Congressional oversight committees will conduct an inquiry into this.

Michael R. McLeod