(Dow Jones) The top federal futures regulator reiterated his call Wednesday for a series of new ethical standards that he believes will also help harmonize securities and commodities regulations.
Commodity Futures Trading Commission Chairman Gary Gensler told an audience in Washington, D.C., that he believes new rules should be implemented to establish firewalls between futures trading desks and research units and that market players should be banned from using "misappropriated" government data to trade in commodity markets.
"Securities regulations require the establishment of firewalls between the research, investment banking and trading branches of broker-dealers. No such firewalls are required in the commodity and futures markets," Gensler said at an event sponsored by Fordham University's College of Business Administration. "Without parallel protection, trading desks could use information developed by research arms before that information is shared with the firm's clients, raising serious questions about the integrity of the firm's services to its clients and confidence in the markets."
The CFTC and Securities and Exchange Commission last year released a detailed paper at the request of the Obama administration citing ways they believe securities and commodities regulations can be harmonized.
The Obama administration asked for the harmonization effort after backing away from a proposal to merge the two agencies amid political pushback on Capitol Hill.
Several of the areas Gensler spoke about Wednesday were contained in that report, including asking Congress to expand the insider-trading laws in the securities world to the futures world by making it illegal to trade on non-public information from agencies like the U.S. Treasury, Federal Reserve and Department of Agriculture.
As an example for why the new law should be implemented, Gensler cited the movie "Trading Places" in which Eddie Murphy and Dan Aykroyd intercept a non-public USDA report about the orange juice crop and use it to make profitable trades and ruin their rivals.
"In real life, using such misappropriated government information is actually not illegal under our statute," Gensler said, adding that the CFTC wants to implement this so-called "Eddie Murphy" rule.
A third change Gensler called for Wednesday, meanwhile, was harmonizing regulations between broker-dealers, investment advisers and commodity trading advisors.
"Any person that offers investment advice to customers should be governed by the same fiduciary standard," Gensler said. "We have recommended that there be a uniform standard that financial advice should be solely in the interest of the customer."