Dissenting Statement of Commissioner Scott D. O’Malia to the Division of Enforcement’s Request that the Commission Issue the Omnibus Order Designating Officers of the Division of Enforcement with the Authority to Issue Subpoena and Take Testimony
August 13, 2013
I decline to authorize issuance of the omnibus Investigation Order, delegating to the Division of Enforcement sweeping subpoena power to investigate possible [redacted] activities [redacted]. I objected to the issuance of a similar omnibus order, which expired on May 20, 2013. While I strongly support a robust enforcement regime, I object to the process of waiving the Commission’s power to authorize an investigation, especially in the post-Dodd-Frank environment.
As with the previous Order, this Order gives the Division of Enforcement far-reaching subpoena authority to investigate possible violations of the rules adopted pursuant to Dodd-Frank. Many of these investigations will involve new and untested laws. If delegated to staff, I am concerned that the Commission will be unaware of the full ramifications of the new laws. Therefore, it is crucially important for the Commission to assess the legal and factual bases for initiating investigations on a case-by-case basis, and not hand over this responsibility to the Division of Enforcement at this time.
But what I find even more troubling is that the Division of Enforcement seeks to circumvent the powers of the Commission as it proposes to bring investigations on a summary basis by utilizing an absent objection process. As I understand, the Division of Enforcement proposed the same process in an earlier request to issue an omnibus subpoena. Since that time, unbeknownst to me, the legal powers of the no-objection process have been reinterpreted by the Commission’s Office of the General Counsel. Now, I am advised that the Commission cannot block a staff-initiated “absent objection” circulation because this process is not a Commission vote.
One of the distinguishing characteristics of an independent agency, such as the Commission, is the ability of the agency to prosecute violations of its statute and rules.1 To ensure fairness in terms of true separation of functions, Congress gave power to the Commissioners to reconsider staff’s recommendations by independently assessing facts and legal justifications for initiating various actions. In other words, Congress intended a decision to bring an investigation to be reflective of a shared opinion of the majority of the Commissioners, rather than a unilateral ruling of the Division of Enforcement’s staff.
While I support the Division of Enforcement’s efforts to expeditiously investigate possible [redacted] activity, I also recognize that the Commission possesses certain responsibilities to execute its law enforcement powers that should not be brushed off to achieve an “efficient” investigative process.
Thus, I would encourage the Commission to preserve its powers, act as an independent agency, and review each enforcement matter on its own merits. For my part, I am committed to considering each enforcement matter in an expedited fashion, so not to delay the Division of Enforcement’s investigative work.
Statement of Commissioner Scott D. O’Malia
Today, after obtaining permission from the Commission’s Office of the General Counsel, I am releasing my dissent in a redacted form to the request by the Division of Enforcement (DOE) to issue an omnibus order of investigation that, through an “absent objection” process, could potentially be extended continuously without the opportunity for a Commission vote. I believe three steps must be taken to ensure that the Commission is executing its enforcement authority in a transparent and legally sound manner.
First, I call upon DOE to recirculate the omnibus order without the absent objection provision. I also encourage the Commission to take immediate steps to reevaluate its procedures to ensure that they have legal authority and are transparent to the public.
I believe in the robust use of the Commission’s enforcement authority to thwart fraud, manipulation, and abuse in CFTC-regulated markets. My concern is with the process that DOE seeks to utilize to extend the duration of these orders.
I acknowledge that, at times, the Commission must rely on various procedures, including the absent objection process and no-action relief to provide direction and/or guidance to market participants in a timely and efficient manner. However, this is in stark contrast to the manner in which the Commission should carry out its enforcement authority. Unlike staff guidance and interpretive statements, the initiation and extensions of enforcement investigations must be confined to the powers granted to the Commission by Congress.
Second, given the importance and magnitude of its mission, the Commission must clarify its policies and procedures to ensure transparency and prevent the misuse of no-action relief, omnibus orders and the absent objection process.
Third, to ensure that the Commission is not abusing its regulatory authority or compromising its enforcement powers, I invite Congress to conduct a full review of the Commission’s internal policies and procedures for various actions and interpretations of the Commodity Exchange Act (CEA). If Congress is dissatisfied with the Commission’s current practices and procedures, it should then enact reforms to the CEA to impose discipline on the Commission so that it complies with the Administrative Procedure Act and other laws.
I am confident the Commission can fulfill its mission in a transparent and legally sound manner.
1 “Whenever it shall appear to the Commission that any . . . person has engaged . . . in any act or practice constituting a violation of any provision of this Act or any rule, . . . the Commission may bring an action in the proper district court of the United States . . ..” (emphasis added). CEA § 6c(a), 7 U.S.C. § 13a-1(a).
Last Updated: August 13, 2013