The hearing also provided an interesting exchange prompted by Arkansas Sen. John Boozman’s query on possible penalties facing MF Global. “If a person doesn’t segregate an account and, essentially, steals the money and gambles it away … is that a criminal process? What is the penalty for that besides being fined?” asked Boozman.

Gensler: “It is quite clear in the statute and rules of the commodity world that customer funds need to be segregated. Those monies can only be invested in a certain list of permitted funds. They aren’t to be used for some other purpose other than for the customer – all day long, every day.”

Boozman: “And if someone breaks that rule and uses those funds for riskier investments, or whatever, what happens to the individuals who do that?”

Surprisingly, Gensler didn’t seem to know. “I might have to defer and get staff to get back to you. But under the Commodities and Exchange Act we just have civil penalties that we pursue in segregation cases.”

Schapiro then piped up. “We’d have the ability to fine someone and legal authorities could certainly pursue a criminal case if they could meet the standards of proof required. Breaking the rules can and should lead to enforcement action and, where appropriate, criminal action, as well.”

Boozman replied “if you go in and rob a bank or financial institution, that’s a federal crime. … There’s no ifs, ands or buts, the resources of the federal government will come to bear and you’ll go to jail for that crime. If a person, through (mingling customer and firm funds) can steal hundreds of billions of dollars and there’s no penalty except a civil (one), that’s a real problem.”

Gensler, after speaking with counsel, then clarified that “the Commodities and Exchange Act says if an individual ‘knowingly and willfully’ violates the act it’s a criminal violation for the individual.”

Boozman: “And we have a history of prosecuting those kinds of things?”

“It’s happened,” said Gensler, unconvincingly.

“Well, that’s not a history,” Boozman shot back. “Again, this is a real problem. And it’s why the American people are losing faith in their institutions.”