The New York Times has the story A Regulator Cuts New Teeth on JPMorgan in ‘London Whale’ Case. The agency is the Commodity Futures Trading Commission.
The agency’s authority to bring such a case traces to Dodd-Frank. For years leading up to the law, the agency was hamstrung in its pursuit of market-manipulation cases. Under existing laws, it had to prove that a trader intended to manipulate the market and successfully created artificial prices.
Even when cases were filed, they rarely panned out. In fact, according to Mr. Chilton, the agency has successfully litigated only one manipulation case in the agency’s 38-year history.
But under Dodd-Frank, the agency must show only that a trader acted “recklessly.”
“In Dodd-Frank, Congress provided a powerful new tool enabling the C.F.T.C. for the first time to prohibit reckless manipulative conduct,” David Meister, the agency’s enforcement director, said in a statement on Wednesday.
Homing in on one day in late February 2012, the agency’s order exposed a series of questionable trading practices at the bank’s chief investment office in London.
The traders, seeking to minimize losses and vowing to “defend the position,” sold more than $7 billion of credit default swaps to hedge funds and other traders on Feb. 29.
It was a “staggering, record-setting volume,” the trading commission said. The sales, the trading commission added, “accounted for more than 90 percent of the day’s net volume traded by the entire market.”
The section of Dodd-Frank bill that was used in this case was championed by Senator Maria E. Cantwell. It all started when women got the right to vote 1n 1920. Elizabeth Warren is not alone in pushing for reform.