Sen Maria Cantwell (D-WA) introduced legislation Thursday that would make it easier for the Commodity Futures Trading Commission (CFTC) to prove manipulation in energy markets.

The legislation, which is cosponsored by Sen. Bill Nelson (D-FL), would bring the CFTC’s burden of proof for market manipulation in line with the lesser standard used by the Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC) and the Federal Trade Commission (FTC) to prove and deter market manipulation.

Current law requires the CFTC to show “specific intent” to do harm to prove manipulation, rather than the “recklessness” standard used by the SEC for the past 75 years, according to Cantwell. Because of the high bar, the CFTC has successfully prosecuted and won only one case of manipulation in the futures markets in its 35-year history. Cantwell’s bill would give the CFTC the same “reckless conduct” standard for manipulation.

“When bad-actors like Enron and Amaranth Advisors manipulate commodities prices, Americans end up footing the bill, paying more for commodities like oil, gasoline, food and natural gas.

“Unfortunately regulators lack the tools to protect us from market manipulation in critical commodity futures markets. Through this tough new language, we can establish a clear, bright-line against illegal market manipulation and can empower regulators to effectively enforce and deter market manipulation,” Cantwell said.

CFTC Commissioner Bart Chilton is a proponent of changing the standard. “I think we need to, at the CFTC, seriously consider changing our manipulation standard…The SEC has an easier legal hurdle to jump, and I think this may be a great opportunity to adjust our rules to be more in line with theirs,” he said in a speech in New York earlier this week.

The existing “specific intent” standard “is a very difficult standard to reach. You’d have to have a pretty dumb individual to, for example, write in an e-mail that you specifically intend to manipulate prices. But that’s what our law currently requires,” he said.

“In addition our case law also requires that we prove an artificial price exists, that the defendant had market power to move the price, and [that] he or she actually did cause the artificial price. Particularly in today’s complex markets, proving ‘artificial price’ can be a daunting task, which more often than not comes down to a ‘battle of the experts’ in court.” Chilton noted.

While the SEC has a different, easier standard to prove manipulation, “I’m not sure that the answer is wholesale adoption of the SEC manipulation standard …but clearly, as Sen. Cantwell and others have recently noted, we need to do something different at the CFTC. The status quo simply isn’t good enough.” he said.

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