Offices of the Chairman
Office of International Affairs
The Office of International Affairs (OIA) assists the Commission in responding to global market and regulatory changes by coordinating the Commission's international activities. OIA provides information and technical support to the Commission and to its other offices and divisions on international matters; comments on Commission rulemakings having foreign implications; analyzes foreign regulatory developments; develops regulatory information sharing arrangements; shares regulatory and fitness information with foreign authorities; and coordinates technical assistance to foreign jurisdictions. OIA represents the Commission in international organizations, organizes international conferences on behalf of the Commission, and provides technical comments to other U.S. financial regulators with respect to relevant international activities. During FY 1999, OIA contributed to this effort through the following activities:
· Completed a survey of selected global jurisdictions to determine the state of regulation of over-the-counter derivatives. The 1999 survey, Regulation of Over-the-Counter Derivatives Transactions, examined the regulatory regimes in 16 jurisdictions across Europe, Asia, and North and South America. The survey supports the Commission's inquiries into the OTC markets, serves as a resource to make existing requirements more accessible, and will facilitate further study of the treatment of OTC derivatives. Copies of the report were provided to the President's Working Group and to members of the Technical Committee of the International Organisation of Securities Commissions (IOSCO) and are posted on the Commission's web site at www.cftc.gov.
· Published the Exchange-Traded Derivatives in Developing Capital Markets Report, containing responses to a template sent in 1998 to certain jurisdictions with developing capital markets. The Report reviews broadly regulatory practices as described by the participating jurisdictions and is posted on the Commission's website.
· Completed a survey, Futures Exchange and Contract Authorization Standards and Procedures in Selected Countries (August 1999). The Report summarizes the standards and procedures in selected countries regarding exchange authorization procedures, rule amendment, the admission of contracts to trading on an exchange, and the amendment of existing contracts. The survey is posted on the Commission's website.
· Coordinated Commission activities within IOSCO and its Technical Committee. OIA staff have represented the Commission on the IOSCO Technical Committee's Hedge Fund Task Force, which has been considering recommendations that would strengthen risk management processes, improve information flows and identify areas where it may be advisable to cooperate with other interested international organizations such as the Basle Banking Committee. OIA staff also are engaged actively in the IOSCO Task Force on the implementation of the IOSCO report, Objectives and Principles of Securities Regulation (Core Principles), that was adopted last year as a statement of regulatory principles against which effective regulation can be measured. OIA staff members have been participating in drafting groups that are preparing surveys for a high-level self-assessment on the extent to which the Core Principles have been implemented.
· Coordinated the Commission's activities within the Technical Committee's Working Party on Secondary Markets. During the year, OIA staff took a leading role in encouraging the Working Party to consider the impact of hedge fund trading from an organized market's perspective. OIA staff members have also led the development of the Working Party's survey on the regulation of electronic trading systems. The survey will provide information that will help the Working Party evaluate whether the 1990 Principles for the Oversight of Screen-Based Trading Systems should be updated.
· Provided technical assistance and information to the Commission's Global Markets Advisory Committee, which has been examining issues related to the competitiveness of the U.S. futures industry.
· Upon request from various international financial regulators, provided information on the Commission's programs and commented on various reports. For example, comments were provided to: the International Monetary Fund regarding its transparency review; the World Bank, International Finance Corporation, and regional development banks regarding training initiatives; and to the World Trade Organization regarding its review of financial services markets.
· Provided comment to the U.S. Department of the Treasury regarding its work with G-7 and G-22 countries on international financial stability activities, including its representation in the Financial Stability Forum. OIA similarly provided comment to the Securities and Exchange Commission regarding its participation in the Financial Stability Forum.
· Participated in and provided technical assistance to the International Regulators Meeting held in conjunction with the Futures Industry Association Conference in Boca Raton, Florida, in March 1999. Forty-one representatives from 27 foreign agencies attended the meeting and discussed issues related to OTC derivatives, electronic trading, Year 2000, and market conduct rules.
· Organized the Commission's annual training seminar in Chicago. The seminar offers foreign authorities intensive training and course work for conducting oversight of futures trading for market integrity and customer protection purposes. The seminar this year included a plenary session with the Chicago Federal Reserve Bank and a day in Washington organized in cooperation with the International Finance Corporation.
· Continued to provide regulatory and fitness information requested by numerous foreign regulatory agencies and acted as an intermediary when foreign regulators request fitness information from the National Futures Association (NFA). This function has been expanded as various markets develop procedures for remote access.
Office of Legislative and Intergovernmental Affairs
The Office of Legislative and Intergovernmental Affairs (OLIA) facilitates communications between the Commission and Congress, other Federal agencies and state governments. OLIA monitors legislative and regulatory activities at the Federal and state levels, advises the Commission and its staff on legislative matters, and responds to Congressional inquiries. OLIA assisted Chairperson Brooksley Born in the preparation of Congressional testimony on eight occasions in FY 1999. One of the eight hearings before Congressional committees involved Commission appropriations for FY 2000.
OLIA assisted Chairperson Born in the preparation of testimony for two hearings before the House Subcommittee on Risk Management, Research, and Specialty Crops: one on the reauthorization of the CFTC and one on the Commission's FY 2000 Budget and Annual Performance Plan. Chairperson Born testified before the Senate Committee on Agriculture, Nutrition, and Forestry on Long Term Capital Management, over-the-counter-derivatives, and hedge funds. Commissioners John Tull, Barbara Holum, David Spears, and James Newsome also testified at that hearing. In addition, Chairperson Born testified twice before the House Committee on Financial Services: first, on hedge fund operations and second, on the President's Working Group's report on hedge funds. Finally, Chairperson Born testified before the House Subcommittee on Capital Markets, Securities and Government Sponsored Enterprises on two occasions: once on technology and banking and once on the operation of hedge funds and their role in the financial system.
OLIA assisted Commissioner David Spears with testimony before Congress on two occasions. Commissioner Spears testified before the Senate Committee on Agriculture, Nutrition, and Forestry on the Commission's pilot program on agricultural trade options. In addition, as Acting Chairman, Commissioner Spears appeared before the House Subcommittee on Risk Management, Research, and Specialty Crops to testify on the Commission's authority to provide U.S. exchanges with regulatory relief. Commissioners Barbara Holum, James Newsome, and Thomas Erickson also testified at the latter hearing.
OLIA facilitated the nomination process for Chairman William J. Rainer and Commissioner Thomas Erickson. In addition, OLIA coordinated communications between the Commission and the General Accounting Office on various reviews of Commission programs and activities.
Office of Public Affairs
The Office of Public Affairs (OPA) is the Commission's liaison with the news media, producer and market user groups, educational groups, and the general public. OPA provides information about the regulatory mandate of the Commission, the economic role of the futures markets, new market instruments, market regulation, international regulatory developments and cooperative initiatives, enforcement actions, customer protection issues, the CFTC's Internet website, and the diverse functions of the Commission.
During FY 1999, OPA assisted over 2,000 domestic and foreign news correspondents, as well as those with a business or academic interest in the Commission's regulatory activities, policies, and accomplishments. In addition to issuing press releases and advisories covering the CFTC's regulatory and enforcement activities, OPA publishes and updates a series of Backgrounders. The Backgrounders highlight and explain important policy issues and initiatives and salient aspects of the Commission's regulatory mandate. For example, OPA Backgrounders describe affinity fraud and commodity scams, transborder fraud and enforcement activities, international enforcement efforts, global cooperation through information-sharing agreements with other financial regulators, cooperation between the CFTC and the states, and foreign instrument approvals and exemptions. OPA also responded to inquiries from the media and general public concerning the CFTC's two recently published Consumer Advisories that alert the public about the warning signs of possible fraudulent activity and offer precautions individuals should take before committing funds: "Foreign Currency Trading Fraud" and "Sales Pitches Based on Seasonal Demand and Other Public Information."
OPA publishes brochures and educational materials about the CFTC, the futures industry, and the futures and option markets. OPA provides timely and important information about the Commission to the media and others through the Quarterly Review, a quarterly summary of CFTC activities and priorities; the Weekly Advisory, a weekly newsletter reporting on Commission activities; and the Daily News Clips, a daily compilation of media stories and articles relevant to CFTC regulatory concerns. In FY 1999, OPA continued to post information on the Commission's Internet website (www.cftc.gov), including the texts of the Weekly Advisory, Backgrounders, speeches by the Chairman and Commissioners, biographies of the Commissioners, press releases, a summary of exemptive, no-action and interpretative letters, CFTC brochures, and a glossary of industry terms.
During FY 1999, OPA conducted 12 briefing sessions for foreign authorities, exchange officials, market professionals, market users, academic representatives, and foreign-based media representatives to acquaint them with the Commission's functions, regulatory responsibilities, and mandate. OPA also conducts briefings for media representatives on proposed and final rules, regulations, and enforcement activities, as well as other ongoing and technical issues. OPA participated in meetings of the Year 2000 Joint Public Information Center that were aimed at ensuring a coordinated effort among public affairs officials of U.S. financial regulators in responding to Year 2000 inquiries from the public and media.
As part of its ongoing efforts to support the Commission's customer education effort, OPA informs the general public and potential customers of the availability of current Commission enforcement and disciplinary information through the NFA's toll-free Customer Protection Information Hotline (800-676-4632). The Hotline helps customers verify the registration status and disciplinary history of firms and individuals in the commodity industry. OPA also provided information for a chapter on commodity investment fraud for inclusion in the 1998-99 edition of the Consumer's Resource Handbook, which is published by the U.S. General Services Administration's Consumer Information Center.
OPA educates and informs the news media, potential customers, and the public about fraudulent commodity investment schemes. OPA works with organizations such as the National Fraud Information Center, the General Services Administration's Consumer Information Center, the Alliance Against Fraud in Telemarketing, the American Association of Retired Persons, Better Business Bureaus, and the National Consumers League. In addition, OPA makes a particular effort to target regional media outlets where the Commission has initiated enforcement actions.
OPA enhanced public outreach activities during FY 1999. The Office continued its efforts to make exemptive, no-action, and interpretative letters and other written communications available more readily to the public and the media, particularly via the CFTC's Internet website. OPA also continued to work closely with the Commission's advisory committees on agriculture, financial products, and global markets to provide information to participants and the media regarding committee activities and deliberations. For example, during FY 1999, OPA assisted with media and external affairs related to the Agricultural Advisory Committee's discussion of the revised pilot program for agricultural trade options. OPA also provided media support to the Global Markets Advisory Committee's meeting on regulatory parity across borders and other issues. In addition, OPA handled extensive media coverage of the placement of terminals in the U.S. by foreign boards of trade, issues related to hedge funds and over-the-counter derivatives, efforts to further streamline the review of market designation applications, the CFTC's new integrated Market Surveillance System, and Year 2000 compliance and planning issues. OPA also handled the significant foreign and domestic media interest generated by the Commission's enforcement actions against Global Minerals and Metals Corporation, Merrill Lynch and Co., Inc., and other defendants; Refco, Inc.; and Princeton Economics International Ltd., Princeton Global Management Ltd., and Martin A. Armstrong.
Office of the Secretariat
The Office of the Secretariat provides administrative support for official Commission activities. The Secretariat coordinates the preparation and dissemination of policy documents and controls the flow of information to the Commission. The Secretariat distributes official Commission documents to the staff, other government organizations, exchange officials, and interested members of the public.
The Secretariat coordinates and schedules the Commission's meetings and meeting agendas, ensuring that the Commissioners have time to review all relevant materials prior to each meeting. The Secretary attends and tapes all Commission meetings and maintains the official minutes of the meetings. Some meetings, such as those concerning market surveillance, enforcement, or adjudicatory matters, are closed to the public by law. Other meetings are open to the public, with audio/video recording and photography allowed.
One day before an open meeting, the Secretariat releases the documents to be discussed in the meeting. Following the meeting, the Secretariat provides transcripts, cassette recordings, or minutes of the meeting upon request. The Secretariat also monitors Commission compliance with the Government in the Sunshine Act as it applies to all meetings attended by a quorum of Commissioners. During FY 1999, the Commission held 63 meetings.
Once the Commission has reached a decision to take an action, agreed on the language of a document, and directed that the document be issued, the Secretary signs the document on the Commission's behalf. The Secretary also keeps and authorizes the use of the official Commission seal and receives all official Commission correspondence. In FY 1999, the Secretariat controlled 259 pieces of correspondence for preparation of the Commission's response.
The Secretariat processed and published 212 items in the Federal Register during FY 1999. The Secretariat also received and responded to hundreds of requests from the public for information about current or past Commission activities or copies of publicly available records.
The Records Section maintains the Commission's official records, receives and responds to requests for information from those records, and performs the research necessary for a response. In FY 1999, the staff responded to over 2,000 such requests from both Commission staff and the public. The Records Section staff also maintains and updates on a daily basis several large automated indices and produces reports compiled from the indices. During FY 1999, the Records Section supported the Commission's website by updating daily the Federal Register and public comment files and by publishing periodically popular Freedom of Information Act (FOIA) releases. The staff continued to refine automated systems and convert official files to microfiche, in accordance with Commission and Federal regulations, and to process exchange submissions, public comment letters, and requests for public information received by electronic mail and through electronic forms on the Commission's website.
Freedom of Information Act Office
The FOIA Office oversees the Commission's compliance with the FOIA, Privacy Act, and Government in the Sunshine Act. These statutes provide public access to government records and meetings and protect an individual's right to privacy. The FOIA Office processes and responds to requests filed under these statutes and prepares annual reports to Congress describing Commission FOIA activities. During FY 1999, the staff received and processed 416 FOIA requests. The FOIA Office also works with the Office of the General Counsel and the Office of the Executive Director to update the Commission's Privacy Act systems notices when a Commission action creates a new system of records or affects existing record systems.
All requests for confidential treatment of records submitted to the Commission by firms or individuals are filed with the FOIA Office. In FY 1999, the Commission received more than 550 such requests. The FOIA Office ensures that the requirements of Commission regulations are met before responding to any FOIA request for records that are subject to a request for confidential treatment.
In FY 1999, the FOIA Office continued to develop an electronic tracking system that will make the processing of FOIA requests more efficient. In addition, regulations simplifying the procedures for requesting confidential treatment were finalized.
Office of the Inspector General
The Office of the Inspector General (OIG), established on April 14, 1989, conducts and supervises audits and investigations of programs and operations of the CFTC and reviews existing and proposed legislation and regulations. The OIG recommends policies to promote economy, efficiency, and effectiveness in Commission programs and operations, and to prevent and detect fraud and abuse. The OIG keeps the Chairman and the Congress informed about problems, deficiencies, and the progress of corrective action in programs and operations.
During FY 1999, the OIG monitored CFTC's compliance with the Federal Manager's Financial Integrity Act and continued a comprehensive review of the information requirements of CFTC's Division of Enforcement. The OIG continued its review of the agency's response to the difficulties inherent in the approach to the Year 2000, reviewed proposed and final CFTC and exchange rules and regulations, and conducted investigations of allegations of impropriety lodged against CFTC employees.