According to a Democratic commissioner, the Commodity Futures Trading Commission (CFTC), should reverse its loosening of oversight of family offices. His comments come in the wake of the blowup of Archegos Capital. The downfall of the family office run by Bill Hwang, a former Tiger Asia manager, triggered billions in potential losses for global banks.
Free from regulatory scrutiny, Archegos had amassed large positions in stocks, including ViacomCBS, using risky derivatives known as “total return swaps,” that are regulated by the U.S. Securities and Exchange Commission (SEC).
The Archegos incident underscores the need for stronger oversight and a reversal of the regulatory rollback of the past two years that keep family offices from regulatory oversight, said Democratic Commissioner Dan Berkovitz in a statement.
“To protect the integrity of the commodity markets, the Commission must be aware of and able to monitor the activities of large family offices,” said Berkovitz.
Family offices are entities established by wealthy families to manage their money and provide related services to family members, such as tax and estate planning, as well as managing philanthropic ventures.
Single family offices generally are not regulated.
Since 2019, the commodity regulator, which oversees the broader swaps market worth hundreds of trillions of dollars.
Regulators are monitoring the situation and are speaking with market players as they try and figure out the full of the Archegos fallout.