Jossie Ward 

Associate Editor

Loyola University Chicago School of Law, JD 2025

The U.S. Commodity Futures Trading Commission (CFTC) regulates U.S. derivative markets, including futures, options, and swaps. On March 19, 2024, the CFTC announced that the independent agency has reached an agreement with U.S. Bank National Association (U.S. Bank NA) and Oppenheimer & Co. Inc. (Oppenheimer & Co.) to settle allegations brought by the CFTC for a combined $7 million. U.S. Bank NA operates as a bank and is a wholly owned subsidiary of U.S. Bancorp. Oppenheimer & Co is a full-service brokerage and investment bank. The CFTC claims included allegations of failure to preserve business communications via personal text. According to the CFTC’s orders, the two companies violated the Commodity Exchange Act and commission regulations. 

Current regulations under the Commodity Exchange Act and Commission Regulations 

The CFTC Order explains that the allegations against U.S. Bank NA and Oppenheimer & Co. Inc. are related to violations of the Commodity Exchange Act and Commission Regulations. Specifically, the Order points to7 U.S. Code § 6g which are rules that impose recordkeeping and supervision requirements on companies registered with the CFTC in order to ensure that those companies, and the actors of those companies, are responsibly discharging their role in the markers. The CFTC requires compliance with these regulations to promote integrity, resilience, and vibrancy of the U.S. derivatives markets. 

Oppenheimer’s message violations and failure to maintain internal controls

The CFTC alleged that since 2019 Oppenheimer & Co. employees, including higher, senior-level employees, violated regulations by utilizing unapproved methods to communicate both internally and externally. The unapproved communication methods include using personal text messages and WhatsApp messages. The messages sent and received by Oppenheimer & Co. employees included messages related to Oppenheimer & Co.’s business. Because the messages were related to business that Oppenheimer & Co. has registered with the CFTC to engage in, the messages were required to be compliant with CFTC-mandated recordkeeping requirements. However, the messages were not properly maintained or preserved by Oppenheimer & Co., and thus would not be available to comply with CFTC requirements. In addition to failing to comply with CFTC recordkeeping requirements, Oppenheimer & Co.’s lack of compliance indicates a lack of internal control. CFTC-registered companies are required to have a certain level of supervision over employees with regard to actions relating to the business of the company. As Oppenheimer & Co. lacked control over the messages and communications related to its business, it also lacked control or supervision over the employees. Both U.S. Bank and Oppenheimer & Co. failed to maintain “hundreds if not thousands” of messages related to business, including communications related to U.S. Bank’s swaps business and Oppenheimer & Co.’s commodities. 

The settlement 

The settlement outlines that U.S. Bank and Oppenheimer & Co. failed to prevent employees from using off-channel communication methods and did not maintain those communications. The CFTC stated that the supervisory panel of the U.S. Bank and of Oppenheimer & Co. responsible for ensuring compliance was also using unapproved communication methods to conduct business discussions. U.S. Bank will pay a $6 million fine and Oppenheimer & Co. will pay a $1 million fine, for a combined $7 Million. Both companies agreed to review policies, procedures, training and supervising methods. Then after, both companies would report back to the CFTC with their applicable findings and changes. Additionally, both companies agreed to follow up with their findings one year later with the CFTC, and to notify the CFTC when they discipline employees for violating procedures related to electronic communications. 

Communications compliance…a team sport

The CFTC is not the only agency pushing for communication compliance. The U.S. Securities and Exchange Commission (SEC) reached a settlement on similar claims with Oppenheimer & Co. and a U.S. Bank affiliate in February 2024. The settlement included fining Oppenheimer & Co. $12 million and fining U.S. Bank $8 million. The CFTC and SEC have been working arduously to promote compliance and have reached several settlements while working simultaneously in the last two years. The CFTC stated that since December 2021, it has imposed over $1.1 billion in fines on 22 financial institutions over unapproved communication methods. Together, the SEC and CFTC have imposed roughly $2.8 billion in penalties. Having not one, but two regulatory agencies drilling down on keeping business communications within proper business communications and promoting proper supervision will provide consumers with greater protection with regards to investments.