U.S. Questions Off-Exchange Bank Activities
Federal regulators have subpoenaed Wells Fargo Bank and Chase Manhattan Bank in connection with financial instruments that might violate federal commodities law, according to officials of the Commodity Futures Trading Commission.
The subpoenas appeared to signal that the commission will be a tougher regulator of off-exchange futures and options trading under its new acting chairman, Kalo Hineman, agency and futures industry sources said. The moves could also discourage banks and other financial institutions from experimenting with new, off-exchange instruments.
The subpoenas relate to a certificate of deposit tied to the price of gold sold by Wells Fargo and a hedging instrument linked to commodity prices that Chase offers, CFTC officials said.
Possibility of Fine
The instruments could violate a federal commodities statute that requires all futures and options to be traded on federally regulated exchanges, the officials said.
Subpoenas do not necessarily lead to enforcement actions by the Commodity Futures Trading Commission but, if a violation is found, a firm can be ordered to halt its activities and, in some cases, pay a fine.
“We are complying fully with (the subpoena),” said a Chase spokesman, who asked not to be identified. “In our opinion, we have not violated any law or regulation.” Chase received its subpoena Aug. 11, he said.
Wells Fargo spokeswoman Betty Lattie said, “We have received at least one inquiry and provided them (the CFTC) with information.”
She said she did not know whether the inquiry was, in fact, a subpoena and that she could not reach bank officials who could clarify the matter. But a commission official, who asked not to be identified, said the document was a subpoena.
Hineman would not comment on the subpoenas but, speaking about off-exchange instruments in general, he said:
“This is a field, a big area, and it’s one, unfortunately, that an awful lot of the participants aren’t too helpful in. They don’t really want to come forward and help resolve some of the regulatory problems that it seems to raise, and I can understand that.”
