good afternoon welcome to capital account i'm more in the store here in washington d.c. these are your headlines for tuesday november thirteenth two thousand and twelve the new york stock exchange suspended trading and more than two hundred companies for most of the trading day yesterday according to the f.t. guess why a technical glitch so added to the list last crash facebook knight capital high frequency trading a component involves the f.t.c. commissioner bart chilton is on the show to talk about what should be done and why it's taken so long to be frank and wall street journal reports a federal jury cleared two former money market mutual fund managers of fraud charges this report only gets to the issue we've seen so often of how difficult it

is to prove intent in these financial fraud or manipulation cases so does the law need to change when it comes to intent or the burden of proof of it all our children think so so we'll talk to him and speaking of intent also find out about the c.f. season ten with regard to m.f. global and the ongoing silver market manipulation probe plus congress or turn to work today they have seven weeks to avert the fiscal cliff or to go off of it so to speak we're sick of the term we ask you to rename it the response was overwhelming we're below our top ten new names in loose change let's get to today's capital account.

from silver market manipulation to high frequency trading to m.f. global or p.f.g. best we hear so much what is going on with this probe we've heard about where our regulators where our charge is answering to all of that the f.t.c. commissioner a democratic member of the author of the book pawns of monium how scam artists are ripping off america we spoke to him earlier first thanks so much for being on the show sure good to be with you it's great to have you know i want to start actually with this the f.t.c. silver manipulation probe just to back up in august we had the front page article in the financial times saying a four year investigation into the possible manipulation of the silver market looks increasingly likely to be dropped after u.s. regulators failed to find enough evidence to support a legal case according to three people for a million with the situation just after that you were quoted by motley fool and we double check with your office and you didn't fact say that the financial times report related to silver is not only premature but inaccurate in several respects i

think the public deserves some answers in the very near future and in addition i should add that you come out publicly saying you do believe there have been fraudulent efforts to persuade and deviously control the price of silver and that there have been violations of the law so it's been a few months since those comments in august do you have any answers for us that you can report. i don't have anything i can share on the investigation and lauren just because you know we're not we're not finished with the number hit by law from divulging some other things but everything that you said is accurate to me based upon the information that i got received from the public certainly there were to farias actions and i believe violations of the law mean when people send you e-mails and say the price of silver is going to be smashed one day and then the next day it actually happens and when that happens repeatedly or maybe six you know eight or nine times. that leads you to question what's going on which is why i

called for this a bit investigation as you say it's been four years but those f.t. that story was premature i had hoped that we would be done by the four year anniversary which would have been september twenty third it's not imminent but i still think it's going to be done rather soon since i've been a little bit off the mark on my timing i don't want to give a date certain a fairly other day said to me will just say manion and i said well when you want to means tomorrow he said no and when you're on a means not today not available on ok fair enough but you have what you just said about what you've seen in the silver market is something i've heard you say before you were saying it a year ago in an interview when you said that you watch the silver market in washington intimately and you've seen the suspicious activity at specific times during the trading day on a consistent basis is this something you still watch in that you're still saying yeah absolutely laura now now when i say do i am i still seeing things that i think are you know against the law etc i can't really comment on it but i am we do often

seem see problematic moves in the market we investigate these things all the time i mean every few days and i think people that are involved in these markets involved in silver markets because they e-mail me and and are unfortunate staff and in particular our surveillance staff get involved when they need to. it's helpful to hear from the public about these things that it's helpful for you to bring these thing to their attention because we need to be on our toes on these issues i've taken tell on for years the column to oh well it's a long time but you know two things one the barclays investigation on libel for example had taken a longer period of time you know it's typical government men were under resourced understaffed and these things take a long time to get right if they were very clear cut lauren i mean if they evidence was all of us right there on things before us then cases would go quickly but on some of these big larger investigations you want to make sure they get them right

when you go to court you want to win you don't want to be thrown back because your evidence isn't strong and with regard to manipulation in general it's a very high standard for us to reach in prosecuting such a case because you have to actually show intent so it's not enough to for an individual trader to have market size and even trade that market size and have a change in the market that doesn't meet the test of manipulation under the law we actually have to show some intent that could be email it could be a wiretap it could be something else but we've got to show that they meant to do it and so it's a difficult test i think that the law should actually be weakened somewhat so we can prove manipulation a lot easier in the future but right now we're stuck with the law as it is that's very interesting so we can get rid of. a strict definition or the requirement of intent if you're to change the law i definitely and change change the intent section now we did a little bit to make it better in dodd frank in two thousand and ten but i'm

convinced that we need to go even further and the idea is i mean the reason that we don't in the future is industry for example have things like bans on insider trading like they do in the spirit world is because we want people to trade on information they have we want them to bring all of the the various facts and figures and senses that they have to the mark. that helps develop actual price discovery but i think we've aired too far letting people do anything and that this intense standard is way too high now so i hope that we relax it somewhat and then all enable us to ensure that we don't have in the future and the markets are devoid of manipulation or attempted manipulation so just to get a little bit more color i do i do want to talk about concentration are you familiar with the degree of concentration in the positions held by major investment bank traders in the silver and gold markets and do you think that any particular position in those markets is more concentrated than should be allowed and whether

that degree of concentration facilitates market manipulation. well it has been in the past in both precious metals actually i've seen very large concentrations and i say large i'm talking about you know orders of magnitude larger than our position limit proposal which is roughly ten percent of a market so in the silver market i've seen thirty plus percent held by one trader per from say what trader that is or what type of rate or it is even but it's a somebody who has a large concentration and i believe speculates in the market i've seen it significant not that high but in gold also but these are things we look at all the time and particularly those traders that have large concentrations we want to see what they're doing where their positions are and how they're impacting markets and when they royal or when they have the potential to roil markets we step in and look at it with a fine tooth comb lauren and when you talk about position limits and that ten

percent proposal where are you guys with that. well i've always for him since two thousand and eight i believe they're important believe they're critical i felt good when they were included in dodd frank unfortunately we've been slowed down there have been delays here and there from capitol hill at the agency itself we have been held up by something called cost benefit analysis which is an extraordinary step to go through to ensure that you're giving people the actual cost of these things but it's been more like cost benefit analysis paralysis in my view and we've been hindered by threatened and actual lawsuits including one just recently the position limits were actually supposed to go into effect on october twelfth of this year and just a short few days before that date federal court judged on rules on behalf of the

largest speculators on the planet and planet and through our position that rule out but to me it's more of a trifling trouble i mean we're going to go back we're going to appeal that i believe in the next two weeks and i also believe will pass yet another position limits rule because we have more information for example on that cost benefit analysis everybody was ready to go forward on october twelfth so now we know precisely what it cost them so i think we'll do a nother rule but we will also appeal and i'm not going to stop fighting on this thing it's important to consumers it's important markets overall it's an organ of the economic engine of our democracy and you have advocated for more regulation of high frequency trading and said before that no place in dodd frank isn't mentioned because hey that was before the flash crash so my question is really if you look at it as a classic trading has been around since long before the flash crash that was just the first time we really were made aware of the public at large and what the

consequences of that can be but really it's been growing since the eighty's so why the regulator has been seemingly late to the game with. in the best case scenario really reactive on this issue i mean now high frequency trading at seventy percent volume. well you mean you said it right there i mean because government is reactive i mean that if i have to think about what my job is and what i try to bring that's different to government and this is just one of the things but it is that we can't be reactive we can't just that's called tombstone mentality when you wait for a disaster in an airline you know circumstance you wait for a plane crash before you put something in place in markets you wait for a flash crash or or even something like hurricane sandy which shut down some markets we need to be you need to be looking around the corner and be nimble and quick and that's just for government in general because they are reactive like you say but with high frequency just traders these traders that i called cheetahs because they're so fast fast fast they really have grown exceptionally fast in the

last several years as you know the flash crash may sixth two thousand and ten sent a wake up call that these markets could definitely be roiled big time if we don't watch out so i've called for several things one unbelievably they're not even required these cheetah traders to be registered to they need testing they're not required required to have their programs tested before they're put in the live production environment we also need to have kill switches in case these cheetah programs go feral and finally we need to find these guys if they do something that's wrong if they violate the law by the second. to get even after this much time since the flash crash we're still talking about what needs to be done so i push back on the premise that we need more regulation asking whether or not the answer is better enforcement of regulations on the book mr chilton did disagree with the premise of some of my questioning and this portion of our discussion is always to be on you tube so go check it out or you tube channel tonight or tomorrow

morning it'll be up and after the break we talk to bart chilton about confidence and the global and p.f.g. still had to as the fiscal cliff draws near we asked on friday for your ideas to rename it the response was so overwhelming we couldn't wait a week to tell you who was the best we'll have our top ten favorite that's next the first your closing market numbers.

you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear see some other part of it and realize that everything you thought you knew you don't. are welcome to the big picture. through a. coup and.

i am going i'm going to a . group. welcome back so bankruptcy paragraph and financials bankruptcy over the last year has roiled the futures market it's hurt a lot of investors who saw their money and segregated customer accounts stolen overall it's had a chilling effect on the futures market investors are not confident we hear that anecdotally and we see that and a decline in volumes and a decline in profits for the c.m.a. for example so and a year like that here's what part chilton author and c f t c commissioner has to say. wow what a year and confidence in the futures market your book puns of money and features

the red flags of fraud for investors to heed my question to you how could any investor have seen an m.f. global coming or a p.s.g. best coming were segregated customer accounts were stolen and segregated customer accounts are supposed to be sacrosanct. no i mean i don't think they could have it's one of the reasons why i don't think we have a couple of things in place that we should have like for example an insurance fund i mean if there had been an insurance fund then m.f. global customers and peregrine financial customers would have been protected there's an insurance fund in the banking industry everybody knows about the f.b.i. see which insurers to two hundred fifty thousand dollars sipek which is the securities insurance bill and that insures people up to five hundred k. so i know that we have an insurance fund that takes congress to act but nobody would have done it before we had these debacle m.f. global and peregrine because there weren't any problems but now we've seen them now

we need an insurance fund and we also need some additional customer protection tools to ensure that regulators can't be duped like we were by the way we're in paragraph by something as silly as photoshop in a post office box that's just embarrassing and not acceptable for the job we're supposed to be do as you write supposed to be doing as you rightly say out there protecting. it's interesting we've we've interviewed james good to us and john wrote a number of times who are pushing for the kind of fund that you're talking about that also has an arm of it that would be enforcement it would go after actions against the perpetrators of these kinds of frauds whatnot so this brings me to an m.f. global and just to refresh everyone's mind in memory about kind of the most damning evidence that this firm knew something was amiss and major players did just to recap in a written statement and timeline provided by the c.m.e. to the chairman of the subcommittee on oversight and investigations it was made clear that on the afternoon of october twenty seventh the c.m.e.

requested that effective immediately any equity withdrawals from m.f. global inc must be approved in writing by cmu groups audit department and m.f. global proceeded to break with this request by wiring money without getting c.m.e. approval in addition for design said congressional testimony that he was not aware of shortfalls with customer accounts until october thirtieth which was right before the firm collapsed and this is in direct contradiction to the december thirteenth testimony by the c.m. knees terrence duffy where he stated that a c.m.e. auditor also participated in a phone call with senior m.f. global employees where one employee indicated that mr course i knew of loans being made from customer segregated accounts that were going on before october thirtieth so there have been reports that a criminal case against corazon has gone cold we haven't seen a civil case from the c.f.d. see my question is why not. well the criminal case obviously i can't speak to because that's the department of justice and the f.b.i. i'll leave that to them with regard to our investigation remember global continues

i'm hopeful that something sort of like sober will be done soon although i can't say that it's that it's imminent but it is a horrible goal and or a real sort of kick in the pants to confidence in futures markets and i hope that anybody no matter who they are or heigho how high a level they were at m.f. global is punished to the full extent i mean if they do the crime they shouldn't just pay a fine they should do the time yeah i couldn't agree more as far as the impact that this has on confidence i just want to play a sound bite from a veteran futures industry trader he had money at best here is the sentiment from so many of these commodities and futures traders that i've heard over the last year some that had money at m.f. global lost it or moved it then to p.s.g. lost it here's larry williams i want to play he says it's never been this bad. to see brokerage firms collapse and with no support from the government or the the

regulatory agencies that was never anybody's imagination not in their worst nightmare. so he's saying these things were not on anybody's worst nightmares or worst imaginative scenarios and the numbers support this decline in confidence a c.m.e. q three profits are down thirty one percent volume has declined is this all a reflection of lost confidence in the wake of m.f. global and p.f.g. best in your view. that and you know a whole laundry list that we don't have time to get into i mean the financial sector has messed up left and right in my view over the last several years there's just a litany list whether or not it's m.f. global or peregrine or whether or not it's the barclays attempt the manipulation in libel or four and that's there is then if you were to to rewrite that list of what they need to worry about in terms of fraud in terms of as ponzi schemes in general looking at these markets today would you say don't have faith and regulators they may not be able to do their jobs i don't have faith in the laws that we hold dear

the rules such as that segregated customer accounts will never be touched are all those things kind of just came off i mean i wouldn't say i don't have confidence in regulators but i mean just sometimes it takes us some time to act but i don't know that we're missing things left and right i don't feel like that but it sometimes it takes us longer than we would and that's because of all the stuff that's going on in these markets that i think are just on tort which is why i think we need a culture shift i think we've got most of the rules and regulations in place or we're about to finish with dodd frank like i said we need some more rules and regs for cheetos we need insurance fund but you know another rule or another regulation isn't going to change the culture that think it's got to come and people need to walk with their wallets and only invest in good corporate citizens who don't pull off these crappy shenanigans so i would say don't trust regulators but look we're

government we do the best we can with the resources we have i think we do a good job given that but there's going to be times where we're slower than most of us would like that's frustrating but that's just the way it is unfortunately. that's government so just one more reason for everybody to heed the old adage let the buyer beware it just seems ever more relevant after hearing regulators speak to all of these issues now we've got just so much more with bart chilton so go to enter a you tube channel you can see more on high frequency trading more on the issue between more regulation versus enforcement we had a sound bite from eric consider of next we've played for him some more of that on line with bart chilton author and see f.t.c. commissioner.

ok let's wrap up with loose change i have someone slightly different than dimitri to take me a little prettier. a lot prettier christine is our is our white house and congressional correspondent here at r.t. and there's a reason she's here but first let me let me get to this aspect of the fiscal cliff because we can't stop hearing about it and already we've gotten sick of it and so on friday we asked you to rename it and more than two hundred twenty five of you submitted answers on our facebook they just ordered rolling and you love this so much that we couldn't wait til friday to pick our top ten and we couldn't pick just one so we had to pick our top ten so here they are let's bring up the top ten let's connery a fiscally transmitted disease bastin fiduciary can kicking count down burning the

farts money and helicopter clip and i've got to give a shout out to chris gibson charlie charlie grant christian panuco and who weighs a kava steen for those five let's move on to the next five we have. ruined i'm revenue ridge fiscal dance steps just falls because a plan flashdance the black swan dive the mayan cliff they predicted it thousands of years ago ok and shout outs there to charlie trying again ok he did a lot of good ones chuck raines again. jacqueline rudy ashton and a mean ben said so thanks so much you guys for weighing in and i'm just gonna have to rotate my usage of these terms because i promised you i do that there just were . so many good ones i have to give a shout out to my dad too who was texting me when we announced on the show and he liked carmageddon with with a k. i thought that was clever and i'm going to have to add one to the list which is fiscal cliff hanger because maybe we won't know exactly what's going on with

lawmakers work on the deal because of changes to access at least that's how it seems from what christine is telling me so christine what is going on with with access at a crucial time when everybody wants to know exactly what's going on with the fiscal cliff negotiations well a couple things i mean just in terms of basically what's happened today there's a vote scheduled this afternoon this evening for six thirty pm eastern all day today one of the main press stakeout location statuary hall totally closed to the press and then the other main closed to the press and that's unusual right i mean it only and there are going to be kind of hours if there could be a number of reasons and then the other place that you know i often go to stand with the camera man or by myself to talk to some of these lawmakers to just kind of wait for them to walk through the will rogers stakeout location that was open for most the day closes guess what time six thirty pm the same time that the vote is going to take place i'm not putting forth any conspiracy theories here it could just be

that they wanted to send the majority of the security guards home but the fact is a lot of these lawmakers are so afraid of being caught saying the wrong thing on camera when they do appear on camera they spout their talking points whether they're asked about them or not i really think these lawmakers who are you know a lot did in their congressional district should be more responsible than just showing up to a fundraiser showing up to a couple town hall meetings they should need to answer questions that legitimate press organizations are asking about what's happened and i think you raise a good point by the way those those entries were very creative. there i think we're going to go with them yeah but it is it's tough and it's echoing the theme of what we saw in the twenty twelve presidential campaign which is. i'm not going to tell you exactly what my plan is until it gets like two weeks before the election and even then i'm not going to tell you the specific details until after the election i think the american people deserve more i think that the you know the

media should be asking more what's your plan you want to represent me what's your plan give me specifics you know you're really passionate about this i appreciate that we have thirty seconds give our viewers just a sense of how easy it is to get access to lawmakers just on the hill in terms of finding out what's going on well certainly there are amazing journalists veteran journalists who have been doing this for years and have built up sources so they might not get that you know one on one interview every day with lawmakers but they have a good access to stuff numbers they find out things under the table they find out things off the record and it leads them to the next step i think generally the house members are a much easier to get to they have to be reelected every two years and so having their face in the media but it's just not very easy no matter who you work for you and if you and if you're young you're ambitious you don't have those connections you got to stay people out and if that's more difficult to do well that's not very fair all right we're awfully there thank you christine i appreciate it thank you so much for joining us that's all we have time for though but be sure to come back tomorrow and in the meantime you know you can follow me on twitter at lauren lyster

you can like our facebook page hey give us more fiscal cliff names you can watch us on you tube see our interview ag service that didn't make the show watch aside hulu and have a great night. download the show the creation so choose your life stream quality and enjoy your favorite. t.v. is not required to watch all its all you need to use your mobile device more charts any time.

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