An interpretation that relates to anti-fraud authority provided in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was recently announced by the U.S. Commodity Futures Trading Commission (CFTC).

The interpretation is the CFTC’s view of the meaning of the term “actual delivery,” and guidance on how the CFTC will determine if the actual delivery exception applies to a transaction.

From Cftc.gov:

Section 742(a) of the Dodd-Frank Act amended the Commodity Exchange Act to add a new section, 2(c)(2)(D), entitled “Retail Commodity Transactions.” Section 2(c)(2)(D) broadly applies to any agreement, contract, or transaction in any commodity that is entered into with, or offered to, a non-eligible contract participant or non-eligible commercial entity on a leveraged, margined, or financed basis. The Section requires such agreements, contracts, and transactions to be conducted on a regulated exchange and subjects them to the CFTC’s anti-fraud authority. However, the Section does not apply if “actual delivery” of the commodity is made within 28 days. The Commission issued the Interpretation to explain its view of “actual delivery” and provide several examples of when “actual delivery” does and does not occur.

David Meister, the Director of the CFTC’s Division of Enforcement, stated, “In this Section of the Dodd-Frank Act, Congress provided the CFTC with added authority to prosecute ponzi schemes and other frauds that are perpetrated in the retail commodities markets, such as scams by people acting as legitimate providers of investments in precious metals like gold and silver. We will use this authority aggressively to protect investors and the markets.”

The interpretation copies are available on the CFTC’s website at www.cftc.gov.