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ARTICLE · 22 JULY 2022

CFTC Penalizes An Inadvertent Commodity Trading Advisor

Hogan Lovells Cadwalader
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The July 19, 2022 CFTC settlement order involving Powerline Petroleum and its principals is one such case.

United StatesFinance and Banking
Peter Y. Malyshev
Peter Y. Malyshev
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Once in a while, a Commodity Futures Trading Commission ("CFTC") enforcement action confirms market participants' worst fears that the CFTC is prepared to, and is able to, find violations of the Commodity Exchange Act ("CEA") where no such violations had previously existed. The July 19, 2022 CFTC settlement order involving Powerline Petroleum and its principals is one such case.

The facts of this case are generally similar to other enforcement actions involving commodity trading advisors ("CTAs") − for example, the 2016 Angus Partners order. An entity that provides either consulting services relating to physical energy commodity transactions (Angus) or acts as a registered introducing broker ("IB") (Powerline) provides some additional service to clients that, in the view of CFTC's division of enforcement, inadvertently or intentionally becomes an advisory service that requires (a) registration as a CTA and (b) making certain disclosures under CFTC Part 4

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