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Office of the General Counsel

Table Of Contents
General Counsel Budget and FTEs
  Budget FTEs
Total Budget $10,724,000 39
Total Change $1,111,000 3
Figure 35: General Counsel Percentage
of Total Budget Dollars
Program Activity Percentage
General Counsel 7%
All Other Programs 93%
Figure 36: General Counsel Percentage
of Total Budget FTEs
Program Activity Percentage
General Counsel 6%
All Other Programs 94%

Justification of the FY 2010 President’s Budget & Performance Plan

The Office of General Counsel (OGC) provides legal services and support to the Commission and its programs. These services include: 1) engaging in defensive, appellate, and amicus curiae litigation; 2) assisting the Commission in the performance of its adjudicatory functions; 3) providing legal advice and support for Commission programs; 4) drafting and assisting other program areas in preparing Commission regulations; 5) interpreting the CEA; 6) providing advice on legislative and regulatory issues; and 7) providing exemptive, interpretive, and no-action letters and opinions to the public. In FY 2010, the OGC program requests 39 FTEs, an increase of three FTEs over the FY 2009 level.

OGC is the legal advisor to the Commission, and a large portion of its workload is reactive in nature. The Office:

OGC’s activities, programs, and support contribute to all of the outcomes and functions of the Commission and have a direct and significant impact on the ability of the Commission to perform its mission. In particular, OGC’s services and expertise are increasingly in demand as a consequence of added enforcement and other litigation activities in, among other areas, energy commodities and collective investment vehicles (such as commodity pools and hedge funds, including unregistered pool operators perpetrating fraudulent Ponzi schemes) that now play an expanding role in nearly every market that impacts the Commission’s mission. Moreover, exchange-traded contracts and other newer derivatives platforms continue to experience explosive growth and, as a consequence of the flow-through from increased activities in these markets, the Commission’s surveillance and enforcement resources are increasingly stressed. This heightened deployment of Commission resources, in turn, spurs demand for readily available legal services from experienced legal talent within OGC. As a direct consequence, OGC’s appellate practice and its other litigation dockets (including subpoena compliance, complex document review, and personnel-related matters) require added resources. The recently-enacted CRA clarified the Commission’s enforcement authority (and expanded its rulemaking authority) over off-exchange retail foreign currency trading, and gave the Commission regulatory authority over significant price discovery contracts traded on exempt commercial markets. The exercise of these authorities will require an expanded role for OGC in providing counsel to Commission staff and in handling litigation matters arising out of those efforts.

Separately, increasing innovation in the futures and capital markets in recent years has yielded a growing number of novel derivative products that contain elements of both futures contracts and securities. Such products span the jurisdictional divide between the CFTC under the CEA and the SEC under the federal securities laws. Last year, the two agencies entered into a Memorandum of Understanding Regarding Coordination in Areas of Common Regulatory Interest to improve efficiency in the approval and regulation of such novel derivative products in order to speed their access to the marketplace. The continuing development of these hybrid instruments will create an increased need for legal analysis of products, statutory jurisdiction, and judicial precedents by OGC attorneys.

The recent credit crisis has spurred calls for the creation of effective clearing solutions for over-the-counter credit default swaps, which some believe have contributed to the severity of the current circumstances. Such clearing may be done by derivatives clearing organizations registered with the Commission. This new functional responsibility can be expected to necessitate additional legal support from OGC for Commission programs performing this clearing oversight function.

Since the enactment of reauthorization legislation in mid-2008, a substantial amount of legislative attention has been devoted to three issues implicating the CEA and the Commission: 1) whether excessive speculation has been responsible, in whole or in part, for significant volatility in prices of crude oil and various agricultural commodities; 2) the possible role of credit default swaps in exacerbating the credit crisis, and potential regulation of the vast over-the-counter derivatives markets; and 3) suggested reform of the financial regulatory structure for all sectors of the financial industry, including the futures industry, in response to the severe economic stresses of recent times. This legislative activity has included several requests for testimony by Commission representatives, a myriad of statutory proposals to address these issues, and a multitude of Congressional requests for information to the Commission. Legislative activity in these areas is expected to continue, and thus the demand for OGC resources in this area will continue apace.

Consequence of Not Receiving Requested Level of Resources

The CEA provides that the Commission “shall have a General Counsel [who] shall report directly to the Commission and serve as its legal advisor.” In that role, OGC reviews all proposed Commission actions to assure their legal sufficiency under the CEA and any other applicable statues, e.g., the Administrative Procedure Act, the Privacy Act, and others. OGC is the Commission’s appellate advocate and also acts as the Commission’s trial lawyer in a range of administrative proceedings and Federal district court matters. It assists the Commission in resolving adjudicatory matters, reviews proposed legislation for its likely impact on the Commission and the futures industry, and suggests needed legislative reforms. OGC also has responsibility for handling Freedom of Information Act requests and appeals filed with the Commission. In addition, the General Counsel serves as the Commission’s Designated Agency Ethics Officer, and in that capacity assures that the agency, the Commission, and its employees comply with Federal ethics rules and regulations. OGC’s activities, programs and support contribute to all the outcomes and functions of the Commission, and have a direct and significant impact on the ability of the Commission to perform its mission.

The volume and complexity of the futures and derivatives markets have grown exponentially, while OGC has shrunk in recent years. A combination of staff attrition through retirements and resignations, and the lingering effects of prior hiring freezes, left OGC with only 18 staff attorneys in early 2008. The easing of restrictions on hiring, plus new positions previously authorized, have enabled OGC to begin rebuilding its ranks by hiring nine attorneys. These recent hires have restored OGC approximately to its strength prior to the recent wave of retirements and resignations (assuming no further attrition). In order to build its capability to handle the new responsibilities it is assuming as discussed above, OGC seeks authorization for three additional positions in FY 2010, including: one mid- to senior level litigator; and two entry- to mid-level general attorneys for regulatory affairs and legislation/inter-governmental affairs. OGC anticipates utilizing these positions to: 1) replenish its litigation program, which has been particularly hard hit by recent retirements and attrition; 2) respond to new regulatory and legislative demands, particularly with respect to energy and foreign currency, in light of a substantial increase in congressional activity affecting the Commission; 3) enhance staff expertise in growing areas such as international law, energy, clearing, over-the-counter derivatives, cross-margining, and novel derivative products, in recognition of today’s expanding, evolving, and global markets; and 4) establish a cadre of junior attorneys who will develop into experienced counsel providing sound legal advice to the Commission for years to come.

As the legal advisor to the Commission, a large portion of OGC’s workload is reactive in nature. In addition to serving the Commission, OGC must respond to outside "stakeholders" whose requirements are not within the Commission’s control, such as Congress and the courts. An understaffed Office of General Counsel risks leaving the Commission’s legal interests less than fully protected.

Table 34: General Counsel Request
($ in thousands)
  FY 2009 FY 2010 Change
FTE Budget
FTE Budget
General Counsel $9,613 36.00 $10,724 39.00 $1,111 3.00
Total $9,613 36.00 $10,724 39.00 $1,111 3.00
Table 35: General Counsel Request by Goal
($ in thousands)
Outcomes FY 2009 FY 2010 Change
FTE Budget
FTE Budget
GOAL ONE: Protect the economic functions of the commodity futures and option markets.
1.1 Futures and option markets that accurately reflect the forces of supply and demand for the underlying commodity and are free of disruptive activity. $1,915 7.17 $2,134 7.76 $219 0.59
1.2 Markets that can be monitored to ensure early warning of potential problems or issues that could adversely affect their economic vitality. 131 0.49 146 0.53 15 0.04
Subtotal Goal One $2,046 7.66 $2,280 8.29 $234 0.63
GOAL TWO: Protect market users and the public.
2.1 Violations of Federal commodities laws are detected and prevented. $3,028 11.34 $3,379 12.29 $351 0.95
2.2 Commodities professionals meet high standards. 601 2.25 671 2.44 70 0.19
2.3 Customer complaints against persons or firms falling within the jurisdiction of the Commodity Exchange Act are handled effectively and expeditiously. 1,493 5.59 1,664 6.05 171 0.46
Subtotal Goal Two $5,122 19.18 $5,714 20.78 $592 1.60
GOAL THREE: Foster open, competitive, and financially sound markets.
3.1 Clearing organizations and firms holding customer funds have sound financial practices. $624 2.34 $698 2.54 $74 0.20
3.2 Commodity futures and option markets are effectively self-regulated. 262 0.98 291 1.06 29 0.08
3.3 Markets are free of trade practice abuses. 590 2.21 663 2.41 73 0.20
3.4 Regulatory environment responsive to evolving market conditions. 969 3.63 1,078 3.92 109 0.29
Subtotal Goal Three $2,445 9.16 $2,730 9.93 285 0.77
Total $9,613 36.00 $10,724 39.00 $1,111 3.00
Figure 37: General Counsel FY 2010 Budget by Goal
Goal Percentage
Goal One 21%
Goal Two 54%
Goal Three 25%
Last Updated: September 23, 2009