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A tough slog toward justice for investors

Meet the regulators of the nation's financial institutions

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In enforcement cases brought by the Commodity Futures Trading Commission, most of the fines ordered are never paid.
By David S. Hilzenrath
Washington Post Staff Writer
Saturday, November 20, 2010; 7:24 PM

For many investors cheated by brokers and other trading professionals, seeking justice from a federal agency responsible for policing the commodities market has been an exercise in futility.

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A top official recently sent a stunning message to the public, saying that for decades the deck has been stacked against investors when they try to recover damages through the Commodity Futures Trading Commission.

In an unusual farewell statement, George H. Painter, one of two administrative law judges who hear investor complaints, said the other judge has long forced investors "to run a hostile procedural gantlet until they lose hope, and either withdraw their complaint or settle for a pittance."

The judge, who is retiring at 83, alleged that his colleague, Bruce C. Levine, undercuts investors "in the cynical guise of enforcing the rules."

A Washington Post examination of the issue found that Painter's comments are just one symptom of a weak and troubled system where small investors get tripped up on technicalities, legal standards are moving targets and agency leaders have cried foul on what they see as issues of basic fairness.

Although its name may be unfamiliar, the CFTC regulates trading in vital markets - from commodities such as oil, cotton and gold to foreign currencies and the complex instruments that helped bring the financial system to the brink of collapse two years ago.

Its mission is to protect investors in markets so risky they have been called the Wild West of Wall Street. Legislation passed this year in response to the financial crisis gives it added responsibilities.

However, as a forum for resolving complaints, the CFTC today is on the brink of irrelevance because investors and even the commission's own staff have chosen to avoid making use of it.

The situation poses a test for CFTC Chairman Gary Gensler, who took office advocating a tough approach to regulation. He had a hard time winning confirmation because some lawmakers doubted his commitment to the task; during the Clinton administration, he resisted efforts to expand CFTC power over financial instruments known as derivatives, which played a central role in the near-meltdown of the financial system.

Gensler declined to be interviewed for this article.

Among The Post's findings:

l Painter is not alone in criticizing Levine's work. CFTC commissioners have repeatedly overruled Levine's decisions, accusing the judge of abusing his discretion.


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