Public Statements & Remarks

Statement of Commissioner Kristin N. Johnson: The Importance of Financial Market Transparency for Systemic Risk Management

February 08, 2024

Transparency is an integral component of the regulatory framework that ensures the safety and soundness and enduring preeminence of our financial markets.  Our statutory mandate expressly directs the Commodity Futures Trading Commission’s (Commission or CFTC) mission to “ensure the financial integrity of all transactions subject to [the Commodity Exchange Act] and the avoidance of systemic risk” and today, consistent with this mandate, the Commission seeks to enhance oversight and improve visibility through well-calibrated data collection approaches.[1]

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) incorporated innovative regulatory features for promoting the stability of the U.S. financial system, including establishing the Financial Stability Oversight Council (FSOC) to monitor for emerging systemic risks that may significantly impact our financial markets and American consumers.  Congress, in drafting the Dodd-Frank Act, recognized that systemic risks are best monitored through collaboration among prudential and market regulators, each endowed with distinct regulatory mandates and empowered to leverage their expertise to support FSOC’s systemic risk oversight objectives.

Specifically, Section 404 of the Dodd-Frank Act amends Section 204 of the Investment Advisers Act of 1940 (Advisers Act) and grants the Securities and Exchange Commission (SEC) the power to require an SEC-registered investment adviser to file with the SEC reports regarding “private funds advised by the investment adviser, as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk by the [FSOC].”[2]  Section 406 of the Dodd-Frank Act, which amends Section 211 of the Advisers Act, instructs the SEC and Commission, after consultation with FSOC, to “jointly promulgate rules to establish the form and content of the reports required to be filed” with the SEC and Commission by investment advisers registered both under the Advisers Act and the Commodity Exchange Act.[3]

As directed by the Dodd-Frank Act, in 2011, the Commission and SEC jointly issued rules to provide FSOC with important information about private fund operations and strategies through Form PF.[4]  Form PF is a confidential form for certain SEC-registered investment advisers to private funds, including those that may also be dually registered with the Commission as a commodity pool operator (CPO) or commodity trading advisor (CTA).[5]  In 2022, the Commission and SEC adopted proposed amendments to Form PF.[6]  As noted in the preamble, the Commission is adopting the joint final rule to amend Form PF (Final Rule) in an effort to address information gaps and improve the Commissions’ and FSOC’s understanding of the private fund industry and the potential systemic risk posed by it.  The Final Rule seeks to clarify aspects of the form and instructions as well as remove certain questions to streamline reporting.

It is increasingly important to carefully monitor disruptions in markets that impact non-bank financial intermediaries as these disruptions may lead to concerns regarding the integrity of banking and non-banking financial institutions.[7]  Well-tailored data collection and effective analysis of the same enhance visibility into correlations across derivatives markets.  Facilitating supervision does engender costs, but the critical data shared enhances enterprise and systemic risk management and mitigates the likelihood of the far greater costs associated with navigating contagion or crises.

Appropriately-tailored regulatory disclosure is a powerful tool in identifying vulnerabilities and trends in our markets, mitigating systemic risk, and addressing financial stability concerns.  Disclosure of financial information to market regulators is critical to the regulatory oversight of our financial markets, particularly when such disclosure is accurate, timely, robust, and usable.  Effective disclosure enables regulators to monitor market activities and take swift, decisive action to prevent or manage market stresses and crises.  I support today’s Final Rule and the careful consideration of both agencies that it reflects.

I commend the work of the staff of the Market Participants Division—Amanda Olear, Pamela Geraghty, Michael Ehrstein, Elizabeth Groover, and Andrew Ruggiero—for their careful work on the Final Rule.

[1] 7 U.S.C. § 5(b).

[2] 15 U.S.C. § 80b–4(b).

[3] 15 U.S.C. § 80b-11(e).

[4] Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF, 76 Fed. Reg. 71128, 71129 (Nov. 16, 2011).

[5] In 2020, the Commission adopted amendments to Form CPO-PQR for CPOs, which is used by CPOs and CTAs for reporting purposes.  In lieu of filing the CFTC’s Form CPO-PQR, CPOs and CTAs may file NFA Form PQR, a comparable form required by the National Futures Association.

[6] Form PF; Reporting Requirements for All Filers and Large Hedge Fund Advisers, 87 Fed. Reg. 53832 (Sept. 1, 2022).

[7] Kristin Johnson, Commissioner, CFTC, Panelist, NBFI: Threat to Financial Stability?, 37th ISDA Annual General Meeting (May 10, 2023),