SPEECHES & TESTIMONY

Statement of Commissioner Dan M. Berkovitz:  Transparency and Accountability in Government

December 10, 2019

I strongly support the Chairman’s announcement that he will not put before the Commission for a vote any settlement agreement or other resolution of an enforcement matter that constrains the Commission, individual Commissioners, or Commission staff from making public statements about that matter.

I am, however, disappointed that despite CFTC staff preparing a proposed rule for today’s meeting that would codify a prohibition of confidentiality clauses in settlement agreements, a majority of the Commission is not ready to support even putting the proposal out for comment.  Ensuring the transparency and accountability of the Commission’s operations and enforcement actions should be a priority of this Commission.  It certainly is a priority for me.  During my tenure as a Commissioner, I will never agree to any gag clause with any party settling an enforcement matter with the Commission.  I will continue to exercise my right to speak on all matters before the Commission, a right that recently was affirmed by a United States Court of Appeals.[1]  Neither a majority of the Commission nor any consent order can take away this right.  Under no circumstance will I agree to be silenced by—or agree to let the Commission or staff be silenced by—any person that the Commission believes has violated the Commodity Exchange Act (“CEA”).

It is of paramount importance that the Commission, Commissioners, and agency staff be able to communicate to the public the reasons why enforcement actions are initiated and concluded.  Congress has protected the ability of individual Commissioners to make public statements on matters before the Commission and it is good government to extend this protection to the full Commission, as well as its staff, when the CFTC settles administrative and civil proceedings.

For example, the Commission, Commissioners, and CFTC staff must be able to speak publicly about the reasons for determining that the law has been violated.  CFTC enforcement actions not only punish parties who violate the law, but also provide guidance to market participants and the public about the agency’s interpretation of the applicable statutes and regulations.[2]  Explaining to the public the legal and factual bases for bringing an action both deters misconduct and avoids chilling legitimate market activity.

In addition, the public has a right to know why the Commission is resolving a case, and whether it is obtaining appropriate remedies when the law is violated.[3]  “The effective functioning of a free government like ours depends largely on the force of an informed public opinion.”[4]  The Commission, Commissioners, and CFTC staff therefore must be able to inform the public about the reasons underlying the settlement of enforcement actions.

Congress has recognized the right of individual Commissioners to speak publicly about matters before the Commission.  CEA Section 2(a)(10)(C) states:

Whenever the Commission issues for official publication any opinion, release, rule, order, interpretation, or other determination on a matter, the Commission shall provide that any dissenting, concurring, or separate opinion by any Commissioner on the matter be published in full along with the Commission opinion, release, rule, order, interpretation, or determination.[5]

The absolute right of Commissioners to make public statements on matters before the Commission—including enforcement matters—was recently affirmed by the U.S. Court of Appeals for the Seventh Circuit.  In In re CFTC, the court explained that Section 2(a)(10)(C) grants every member of the Commission “a right to publish an explanation of his or her vote.”[6]  The court made it clear that the Commission could not enter into any consent order in an enforcement matter that impaired the right of Commissioners to make public statements about the underlying case:

This is a right that the Commission cannot negate.  It could not vote, three to two, to block the two from publishing their views.  So if we understand the consent decree as an effort to silence individual members of the Commission, it is ineffectual, for no litigant may accomplish through a consent decree something it lacks the power to accomplish directly, unless some other statute grants that power—and no one argues that any other statute overrides § 2(a)(10)(C).[7]

But we should go further and formally recognize that these same protections should extend to the Commission and its staff.[8]  The public’s right to know, and the enforcement objectives met by promoting transparency, apply with equal force to the Commission acting as a collective body, and the staff when it speaks on the Commission’s behalf.

Indeed, market participants routinely request CFTC staff to provide information about resolved actions, or make comparisons among actions, to facilitate their compliance with the CEA and Commission regulations.  It is essential that CFTC staff be able to respond to these requests by providing guidance about how the Commission interprets the CEA and its regulations, and how those interpretations have been applied in specific circumstances.  Such guidance facilitates compliance by market participants and supports the Commission’s ability to prosecute enforcement actions.

There is ample precedent and support for federal government agencies prohibiting confidentiality provisions in settlement agreements, whether in the policies of other federal agencies, judicial rulings, or constitutional principles.  For example, the Department of Justice[9] and the Equal Employment Opportunity Commission[10]—similarly comprised of up to five presidentially appointed bipartisan members—prohibit confidentiality provisions in settlement agreements.  Appellate courts have invalidated confidentiality provisions that abrogated statutory disclosure obligations, such as that provided by CEA Section 2(a)(10)(C).[11]  And the Supreme Court has held that federal officials have immunity from suit for public statements made in the performance of official duties.[12]

Transparency in the Commission’s enforcement actions is essential to promoting compliance with the CEA and the Commission’s regulations and public confidence in our markets.  So while I thank the Chairman for making this issue a priority, I am extremely disheartened that we do not yet have support among the Commission to codify this rule.

 

[1] In re CFTC, 941 F.3d 869 (7th Cir. 2019).

[2] See, e.g., Reddy v. CFTC, 191 F.3d 109, 123 (holding that purpose of sanctions under the CEA should be “to further the [CEA]’s remedial policies and to deter others in the industry from committing similar violations); In re First Fin. Trading, Inc., CFTC No. 00-35, 2002 WL 1453795, at *2, 14, 20 (July 8, 2002) (stating that CFTC has “important and delicate government function of punishing illegal conduct” and that CFTC civil penalties should serve as both specific and general deterrents) (quoting Miller v. CFTC, 197 F.3d 1227, 1236 (9th Cir. 1999)); cf. SEC v. Vitesse Semiconductor, 771 F. Supp. 2d 304-09 (S.D.N.Y. 2011) (noting that enforcement actions brought by Securities and Exchange Commission serve the public interest and deter future misconduct).

[3] See EEOC v. Erection Co., 900 F.2d 168, 172 (9th Cir. 1990) (Reinhardt, J. concurring in part and dissenting in part).

[4] Barr v. Matteo, 360 U.S. 564, 577 (1959) (Black, J., concurring) (acting director of federal agency could not be held liable for damages for arising from press release announcing suspension of agency employees for misconduct).

[5] 7 U.S.C. 2(a)(10)(C).

[6] In re CFTC, 941 F.3d at 873.

[7] Id.

[8] Notably, the court of appeals extended the protections afforded by Section 2(a)(10)(C) to Commission staff who assist Commissioners in making such public statements.  Id. (“And because members of federal agencies are entitled to the assistance of their staffs, a statute entitling the Commissioners to speak their minds also means that it would be inappropriate to penalize persons who helped them do it.”)

[9] 28 C.F.R. 50.23.

[10] U.S. Equal Employment Opportunity Comm’n, Regional Attorneys’ Manual, Pt. 3.IV.A.2.e (Apr. 2005), available at https://www.eeoc.gov/eeoc/litigation/manual/ (“Congress, the media, stakeholders, and the general public should have access to the results of the agency’s litigation activities, so that they can assess whether the Commission is using its resources appropriately and effectively.”).

[11] See, e.g., Ford v. City of Huntsville, 242 F.3d 235, 241-42 (5th Cir. 2001) (vacating confidentiality order in settlement agreement between City of Huntsville and a private party).  In Ford, the Fifth Circuit held that a federal district court judge has an obligation to consider a statute requiring disclosure of “public information” and demonstrate a “compelling reason” for entering an order that conflicts with that statute, before issuing a confidentiality order to a governmental entity.  Id.; see also Davis v. E. Baton Rouge Par. Sch. Bd., 78 F.3d 920, 931 (5th Cir. 1996) (district court abused its discretion in entering order closing school board meetings without considering confidentiality order’s effect on Louisiana law); Pansy v. Borough of Stroudsburg, 23 F.3d 772, 791 (3d Cir. 1994) (“[W]here a governmental entity is a party to litigation, no protective, sealing or other confidentiality order shall be entered without consideration of its effect on disclosure of government records to the public under state and federal freedom of information laws.”) (citations and alterations omitted).  “When a court orders confidentiality in a suit involving a governmental entity . . . there arises a troublesome conflict between the governmental entity’s interest as a litigant and its public disclosure obligations.”  Pansy, 23 F.3d at 791.

[12] See, e.g., Barr v. Matteo, 360 U.S. 564 (1959); Spalding v. Vilas, 161 U.S. 483 (1896).  See also Harlow v. Fitzgerald, 457 U.S. 800 (1982) (general discussion of immunities of federal officials acting within the scope of their duties); Butz v. Economou, 438 U.S. 478 (1978) (general discussion of prosecutorial immunity).