CFTC Keeps Doing Business With Only Two Commissioners

Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...

By Richard Hill

President Donald Trump’s decision to withdraw a pair of pending CFTC nominations isn’t likely to incapacitate the agency, thanks in part to a good working relationship between the two remaining commissioners.

Acting Chairman J. Christopher Giancarlo, a Republican, and Commissioner Sharon Bowen, a Democrat, are the only ones serving on the five-member Commodity Futures Trading Commission since former Chairman Timothy Massad left the agency Feb. 17.

“There’s a degree of comity and camaraderie that exists, and I don’t think it’s a hostile environment at all,” said Micah Green, Steptoe & Johnson LLP partner in Washington who co-chairs the firm’s Government Affairs and Public Policy Group and also heads its cross disciplinary financial services practice. Giancarlo and Bowen “get along very well [and] their staffs work very well together.”

The comity between Giancarlo and Bowen, who joined the commission together in 2014, contrasts with the situation at the Securities and Exchange Commission where the two remaining commissioners, who both served previously as Senate Banking Committee aides, have repeatedly clashed in their current roles. Nevertheless, the CFTC, like the SEC, is expected to stick to relatively non-controversial matters until a full complement of commissioners is in place.

“What you’ll see in the short term is action only where there is complete agreement. On motherhood and apple pie-type issues, you might see the [CFTC] move forward,” said Steptoe & Johnson LLP partner Matthew Kulkin. “Where things will slow down a little are areas where you naturally would have discussion, negotiation and compromise.”

Trump withdrew the nominations of Democrat Chris Brummer and Republican Brian Quintenz on Feb. 28. The Senate Agriculture Committee had approved both last year, although neither received a Senate floor vote. Then-President Barack Obama renominated the pair three days before leaving office.

Trump’s decision to withdraw the nominations isn’t likely part of any “cloaked agenda” to delay policy making, said former CFTC Commissioner Bart Chilton.

“I expected that [the nominees] would be withdrawn, despite what seems like very fine qualifications,” Chilton said. “There’s a new president. He gets to pick.”

The administration is currently vetting Republicans and Democrats for the commission, according to Chilton and Dan Berkovitz, a former CFTC general counsel. Berkovitz said nominees could be announced in a matter of weeks. Such a timeline could lead to new commissioners by August, just prior to Congress’ annual month-long recess. Chilton called that “the best scenario,” though he cautioned it “may be too optimistic.”

Meanwhile, even with only two commissioners instead of the full slate of five, the business of the commission is continuing, sources said.

Operating `Effectively and Smoothly.’

“I think things are operating quite effectively and smoothly,” said Green, “It’s not broken now,” he told Bloomberg BNA, noting several staffing moves made by Giancarlo, including naming new heads for the divisions of Enforcement and Market Oversight. Giancarlo also named a new general counsel March 6.

“The CFTC is functional with two commissioners, and the current acting commissioner has been moving on his agenda,” said Gary DeWaal, a special counsel at Katten Muchin Rosenman LLP, New York, who specializes in financial services regulatory matters. “There’s nothing really broke over there right now. My own experience with the CFTC in the last couple of weeks is, it’s moving full-speed on miscellaneous issues.”

DeWaal noted agency action on its two biggest pending proposals—rules to limit speculative trading, and to oversee automated trading activity. The commission recently closed a comment period on a reproposed speculative trading rule, extended the comment period on Regulation AT, and postponed a compliance date for long-awaited swaps collateral requirements. “I don’t see any slowdown,” DeWaal said. “As long as they have two folks, they’ll be moving.”

At the same time, Berkovitz said that Giancarlo, who reportedly is a leading contender to be nominated for permanent chairman, must walk a fine line in his current position. Because Giancarlo might be subject to a future confirmation hearing, he “has to be more cautious. If you make somebody mad in the Senate, that could block your confirmation,” Berkovitz said.

Chilton, who worked on a three-person commission for a while, said that while the agency can operate with less than a full set of commissioners, “it is severely stifling. They can’t even ride in an elevator together unless they are accompanied by an attorney.”

Work still can get done, however, with commissioners talking to each other through staff. “There are appropriate ways to work while still respecting” government in the sunshine laws, he said.

Nevertheless, don’t expect major proposals, like speculative position limits and Reg AT, to be adopted with only two commissioners. “I don’t see [action on] anything controversial until you get the next complement of commissioners,” Berkovitz, a partner at Wilmer Cutler Pickering Hale and Dorr LLP, Washington, who specializes in swaps and futures law, said.

To contact the reporter on this story: Richard Hill in Washington at

To contact the editors responsible for this story: Phyllis Diamond at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Securities & Capital Markets on Bloomberg Law