Office of the General Counsel

General Counsel Budget and FTEs

	Budget	FTEs
Total Budget	$14,242,000	47
Total Change	$1,413,000	0

General Counsel Percentage
of Total Budget Dollars

Program Activity	Percentage
General Counsel	7%
All Other Programs	93%

General Counsel Percentage
of Total Budget FTEs

Program Activity	Percentage
General Counsel	7%
All Other Programs	93%

Justification of the FY 2011 President’s Budget & Performance Plan

The Office of General Counsel (OGC) provides legal services and support to the Commission and all of 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; and 6) providing advice on legislative and regulatory issues. In FY 2011, OGC requests 47 FTEs, which is a continuation of its current staffing at the FY 2010 level.

As Legal Advisor to the Commission, OGC:

• Reviews for legal sufficiency all substantive regulatory, enforcement, legislative, and administrative matters presented to the Commission;
• Advises the Commission on the application and interpretation of the CEA, all other statutes to which the Commission is subject or that have relevance to the Commission's regulatory mission, and other pertinent administrative and legislative issues;
• Assists the Commission in performing its adjudicatory functions through its Opinions and Review Program;
• Represents the Commission in appellate litigation, including participation as amicus curiae; certain trial-level cases, including bankruptcy cases involving futures industry professionals; and certain kinds of administrative litigation;
• Provides legal support to the Commission to assure compliance with laws of government-wide applicability such as the Privacy, Government in the Sunshine, Regulatory Flexibility, Paperwork Reduction, and Federal Advisory Committee Acts;
• Advises the Commission with respect to all matters related to the Freedom of Information Act, and responds to requests for non-public Commission records, as well as handling appeals from initial determinations regarding requests for records;
• Advises the Commission and its staff with respect to all matters related to the Commission’s ethics standards and compliance with its Code of Conduct, as well as with government-wide ethics regulations promulgated by the Office of Government Ethics;
• Advises the Commission on personnel, labor, contract, and employment law matters, including cases arising under Title VII of the Civil Rights Act of 1964 and other antidiscrimination statutes, and Merit Systems Protection Board cases arising under the Civil Service Reform Act of 1978;
• Monitors, reviews, and comments on proposed legislation affecting the Commission or the futures industry, prepares technical assistance regarding draft legislation as requested by members of Congress or their staff, and provides liaison with other Federal regulators as necessary on specific legislative projects;
• Provides staff support to the PWG on Financial Markets;
• Provides written interpretations of Commission statutory and regulatory authority and, where appropriate, provides exemptive, interpretive, and no-action letters to regulatees and potential regulatees of the Commission; and
• Counsels other Commission staff on legal aspects of various issues arising during the course of Commission business.

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.

The demand for OGC’s services and expertise on the legislative front is expected to remain high through the upcoming year as Congress focuses its attention on issues arising out of the recent financial crisis, including proposals to regulate the vast over-the-counter derivatives markets. In addition to advising and assisting the Commission on these matters, OGC expects to continue to be called upon to provide technical assistance to members of Congress and their staff, as well as the U.S. Treasury, on numerous pending pieces of legislation affecting futures and derivatives markets. Other issues relevant to the Commission on which Congress is expected to focus its attention include a proposed carbon cap-and-trade regime, speculative trading in energy and agricultural futures markets, hedge fund registration and the supervision of systemically important entities including clearinghouses. The call for OGC resources in this area is expected to remain at a high level as this legislative activity generates frequent 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.

In addition, OGC is heavily involved in advising the Commission on ensuring the fair and orderly trading of futures contracts. In particular, OGC is assisting the Commission regarding the implementation of its new authority, granted as part of the CRA in 2008, to set position limits for SPDC contracts traded on ECMs. Other complex matters before OGC include legal counsel regarding efforts to harmonize the CFTC's and SEC's respective regulatory structures. Further, 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. Pursuant to the MOU between the CFTC and SEC, the agencies cooperate 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 creates increased need for legal analysis of products, statutory jurisdiction, and judicial precedents by OGC attorneys. Finally, ongoing initiatives by the U.S. Treasury’s FinCEN, coupled with the MOU that the CFTC has entered into with FinCEN, are expected to increase the need for OGC resources addressing anti-money laundering and counter-terrorism financing issues.

Further, OGC's responsibility to review for legal sufficiency all substantive regulatory, legislative, enforcement and administrative matters presented to the Commission has increased as a consequence of heightened activity by other Divisions within the Commission. The Commission continues to vigorously prosecute manipulative and fraudulent activities in, among other areas, energy commodities and collective investment vehicles (such as commodity pools and hedge funds, including unregistered pool operators perpetrating 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 increased activity 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 in OGC. The recently-enacted CRA clarification of the Commission’s enforcement authority (and expansion of rulemaking authority) over off-exchange retail foreign currency trading is one of the most visible instances in this regard.

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 order to continue to effectively and efficiently perform that statutory role, OGC must maintain its current staffing level in FY 2011. As described above, the volume and complexity of OGC's workload has grown exponentially, while OGC has only recently recovered from a dramatic depletion of staff. 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 rebuild its ranks since that low. Given the substantial regulatory activity underway by the Commission, and the stakes that attach to OGC’s analysis of such initiatives, maintenance of the current staffing level for OGC’s legal program is an imperative.

All proposed new rules and rule amendments, enforcement actions, exchange and clearinghouse application approvals, and international undertakings, among other initiatives, that are recommended to the Commission are reviewed by OGC both to ensure their legal sufficiency and to make certain that the Commission is appropriately apprised of all facts and potential risks relevant to its decision whether to approve the recommended action. Failure in this regard could expose the Commission to a finding of having acted in an arbitrary and capricious manner in violation of the Administrative Procedure Act in the regulatory context, and to liability for a litigation opponent’s attorney fees pursuant to the Equal Access to Justice Act in the enforcement context.

The consequences of not maintaining OGC’s current staffing level with properly equipped persons will leave OGC unable to fulfill its statutory role effectively and may result in the Commission's receiving and acting on legal advice that is either not timely or that lacks the requisite depth and rigor. Absent sufficient OGC staff to fulfill its advise-and-review function, OGC may be unable to provide the Commission with timely legal advice on pending matters. Separately, 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 in these critical forums less than fully protected.

General Counsel Request
($ in thousands)

	FY 2010		FY 2011		Change
	Budget Request	FTE	Budget Request	FTE	Budget Request	FTE
General Counsel	$12,829	47.00	$14,242	47.00	$1,413	0.00
Total	$12,829	47.00	$14,242	47.00	$1,413	0.00

General Counsel Request by Goal
($ in thousands)

Outcomes	FY 2010		FY 2011		Change
	Budget Request	FTE	Budget Request	FTE	Budget Request	FTE
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.	$2,454	8.99	$2,724	8.99	$270	0.00
1.2 Markets that can be monitored to ensure early warning of potential problems or issues that could adversely affect their economic vitality.	172	0.63	191	0.63	19	0.00
Subtotal Goal One	$2,626	9.62	$2,915	9.62	$289	0.00
GOAL TWO: Protect market users and the public.
2.1 Violations of Federal commodities laws are detected and prevented.	$3,865	14.16	$4,291	14.16	$426	0.00
2.2 Commodities professionals meet high standards.	753	2.76	836	2.76	83	0.00
2.3 Customer complaints against persons or firms falling within the jurisdiction of the Commodity Exchange Act are handled effectively and expeditiously.	1,891	6.93	2,100	6.93	209	0.00
Subtotal Goal Two	$6,509	23.85	$7,227	23.85	$718	0.00
GOAL THREE: Foster open, competitive, and financially sound markets.
3.1 Clearing organizations and firms holding customer funds have sound financial practices.	$771	2.82	$855	2.82	$84	0.00
3.2 Commodity futures and option markets are effectively self-regulated.	344	1.26	382	1.26	38	0.00
3.3 Markets are free of trade practice abuses.	742	2.72	824	2.72	82	0.00
3.4 Regulatory environment responsive to evolving market conditions.	1,837	6.73	2,039	6.73	202	0.00
Subtotal Goal Three	$3,694	13.53	$4,100	13.53	406	0.00
Total	$12,829	47.00	$14,242	47.00	$1,413	0.00

General Counsel FY 2011 Budget by Goal

Goal	Percentage
Goal One	20%
Goal Two	51%
Goal Three	29%

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Last Updated: March 19, 2010