|All Other Programs||93%|
|All Other Programs||93%|
The FY 2012 Budget for the Office of the General Counsel is $22,876,000 and 70 FTE, of which $6,499,000 and 20 FTE relate to Dodd-Frank.
Title VII of the Dodd-Frank Act establishes a comprehensive new regulatory framework for swaps. It will reduce risk, increase transparency, and promote market integrity within the financial system by, among other things: 1) providing for the comprehensive regulation of swap dealers and major swap participants; 2) imposing clearing and trade execution requirements on standard products; 3) creating robust record-keeping and real-time reporting regimes; and 4) enhancing the Commission’s rulemaking and enforcement authorities for, among others, all registered entities and intermediaries subject to the Commission’s oversight.
In terms of increased demands for legal services from OGC, the Dodd-Frank Act will require OGC to perform new and substantial services on behalf of the Commission and to provide legal counsel and support to all other programs within the Commission as they address novel and complex legal issues arising in the development and application of rules to implement this broad statutory scheme. More specifically, the Dodd-Frank Act, in its implications for OGC:
The Commission’s development of rulemakings, its regulatory initiatives undertaken to implement those rules, and its enforcement actions against those alleged to have violated those rules, must pass legal muster. The Commission cannot suffer the fate of moving so aggressively to implement new authorities granted to it by Congress that legal limitations embedded in the Dodd-Frank Act itself, or contained in other statutes applicable to the activities of government agencies, are given insufficient analysis. The Commission will only be considered to have successfully implemented its new mandate in the Dodd-Frank Act if its rules, regulatory actions, and enforcement proceedings are able to withstand legal challenge and judicial review.
OGC will be instrumental to assuring that success. An insufficiently staffed OGC may result in the Commission receiving legal advice on Dodd-Frank Act issues that is not thoroughly grounded in statutory construction and rigorous legal analysis. If stretched thin, OGC’s legal services to the Commission – and its legal work product to outside stakeholders such as Congress and the courts – may not be sufficiently timely or thorough. In short, the consequence of not providing 20 additional FTE to OGC is that the Commission will be placed at risk of failure in the implementation of the new regulatory regime ushered in by the Dodd-Frank Act.
OGC provides legal services and support to the Commission and all 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 2012, the OGC requests a total of 50 FTE to continue current operations.
As the Legal Advisor to the Commission, OGC:
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.
Although the Dodd-Frank Act has been enacted, OGC expects to continue to be called upon to provide technical assistance to members of Congress and their staff with respect to ongoing legislative proposals affecting futures and swap markets. As one example, legislative proposals that include new carbon markets may again require technical analysis and assistance.
In addition, OGC is heavily involved in advising the Commission on the use of its existing authorities to ensure the fair and orderly trading of derivatives contracts. In particular, OGC is assisting the Commission regarding the implementation of its authority, granted as part of the CRA, to register and regulate the activities of those involved in selling off-exchange foreign currency contracts to retail customers. Other complex matters before OGC include legal counsel regarding efforts to harmonize the CFTC's and SEC's respective regulatory structures. 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 (and the enactment in the Dodd-Frank Act of a formal process to address any resulting jurisdictional issues) creates an increased need for legal analysis of products, statutory jurisdiction, and judicial precedents by OGC attorneys. Finally, ongoing initiatives by the U.S. Treasury’s Financial Crimes Enforcement Network (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, 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 continue to experience marked 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 Commission’s increasingly active involvement in international initiatives with its counterparts overseas also requires heightened OGC review for consistency with statutory and regulatory mandates.
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 a current service level of 50. 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 and enforcement activity underway at the Commission, and the stakes that attach to OGC’s analysis of such initiatives, maintenance of a staffing level of 50 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 receiving the current services level 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 OGC risks leaving the Commission’s legal interests in these critical forums less than fully protected.
|Subprogram||FY 2011||FY 2012||Change|
|Program Activity||FY 2011||FY 2012||Change|
|Outcomes||FY 2011||FY 2012||Change|
|GOAL ONE: Protect the economic functions of the commodity futures, options and swaps markets.|
|1.1 Futures, options and swaps markets that accurately reflect the forces of supply and demand for the underlying commodity and are free of disruptive activity.||$2,615||9.57||$5,117||15.66||$2,502||6.09|
|1.2 Markets that can be monitored to ensure early warning of potential problems or issues that could adversely affect their economic vitality.||183||0.67||556||1.70||373||1.03|
|Subtotal Goal One||$2,798||10.24||$5,673||17.36||$2,875||7.12|
|GOAL TWO: Protect market users and the public.|
|2.1 Violations of Federal commodities and swaps laws are detected and prevented.||$4,118||15.07||$6,883||21.06||$2,765||5.99|
|2.2 Commodity professionals meet high standards.||803||2.94||2,993||9.16||2,190||6.22|
|2.3 Customer complaints against persons or firms falling within the jurisdiction of the Commodity Exchange Act are handled effectively and expeditiously.||2,014||7.37||2,366||7.24||352||-0.13|
|Subtotal Goal Two||$6,935||25.38||$12,242||37.46||$5,307||12.08|
|GOAL THREE: Foster open, competitive, and financially sound markets.|
|3.1 Clearing organizations and firms holding customer funds have sound financial practices.||$820||3.00||$964||2.95||$144||-0.05|
|3.2 Commodity futures, options and swaps markets are effectively regulated.||367||1.34||772||2.36||405||1.02|
|3.3 Markets are free of trade practice abuses.||786||2.88||928||2.84||142||-0.04|
|3.4 Regulatory environment is responsive to evolving market conditions.||1,957||7.16||2,297||7.03||340||-0.13|
|Subtotal Goal Three||$3,930||14.38||$4,961||15.18||$1,031||0.08|