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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

SEC Looking At Insider Trading Rules For Commodities Markets

Posted in Dodd-Frank, SEC Enforcement

SEC Chairman Mary Jo White recently stated at a Senate Banking Committee hearing that the SEC was examining whether the insider trading rules should be expanded to include the commodities markets.  White’s statements were made in response to questioning about the role of several large banks in the commodities market.  Insider trading is enforced in the equities market by the antifraud provisions but those provisions do not apply to the commodities market. 

White’s comments were made in response recent criticism from several lawmakers relating to large banks’ commodities holdings.  For example, Senator Sherrod Brown recently asked regulators to look into the possibility that banks were trading on information that they have as a result of their ownership of physical commodities, such as banks owning large fleets of oil tankers and trading on the price of oil.

This recent announcement should come as no surprise.  Since the 2008 Wall Street crisis and the passage of the Dodd-Frank Act, regulators have become more responsive to the public outrage against large institutions.  While the SEC and CFTC have been overwhelmed with implementing the Dodd-Frank Act, it is likely that regulations relating to insider trading in the commodities market will be issued in the near future.