After enactment of the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010 (“Dodd-Frank”), Commodity Futures Trading Commission (“CFTC”) expanded its enforcement authority outside the traditional realm of exchange-traded commodities. The 11th Circuit Court of Appeals has confirmed CFTC authority over certain retail commodity transactions when no exception to the Commodity Exchange Act exists. In exercising its authority, CFTC has initiated actions against a number of unregistered precious metals dealers who engage in off-exchange transactions. CFTC alleged the precious metals dealers did not meet the physical delivery requirements that would exempt their transactions from being conducted on a registered exchange. CFTC further alleged that the dealers neither intended to deliver the commodity nor were capable of delivering it.
Over the last few years, and more importantly over the last several months, consent orders have been entered in several cases which impose significant monetary penalties, require restitution, and imposed permanent trading and registration bans from engaging in impermissible off-exchange transactions.