Senators Elizabeth Warren (D-MA), Mark Warner (D-VA) and Representative Elijah Cummings (D-MD) introduced the Derivatives Oversight and Taxpayer Protection Act. The bill amends the CEA to strengthen federal oversight of derivatives.

The proposed legislation would:

  • direct the CFTC to collect user fees from financial firms in order to cover its budget, an action intended to help the CFTC manage its increased oversight responsibilities under the Dodd-Frank Act;
  • enhance penalties for violations from $140,000 to $1 million for individuals, and from $140,000 to $10 million for other entities, while providing an alternative measure that triples (i) either the monetary gain of the violator or the losses caused by such violation, and (ii) the amount of any penalty for repeat offenders;
  • close the "cross-border loophole" in order to prevent large financial firms that maintain operations abroad from circumventing many key CFTC requirements;
  • end certain foreign exchange swaps' exemption from CFTC jurisdiction, as provided currently by the Secretary of the U.S. Treasury Department under the authority of the Dodd-Frank Act;
  • strengthen the CFTC margin rule by requiring initial margin in inter-affiliate swaps to be posted;
  • ban the use of closeout netting to calculate minimum capital requirements; and
  • require the CFTC and other regulators to issue reports that address concerns about derivatives clearinghouses.

In an accompanying press release, Senator Warren emphasized the importance of the bill's preventative measures:

The only way to make sure that derivatives can never lead to a financial crisis and taxpayer bailouts again is to put in place clearer rules and stronger oversight. Otherwise, big financial firms will be able to rake in billions when things go well, then come back to taxpayers with their hands out when things come crashing down. That might be just fine for Republicans and their allies on Wall Street, but Democrats are standing together to make sure that never happens again.

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