On Tuesday, June 3, the Senate approved the nominations of Timothy Massad to be Chairman of the CFTC and Christopher Giancarlo and Sharon Bowen to be Commissioners of the CFTC. Messrs. Massad’s and Giancarlo’s nominations were approved by voice vote. Ms. Bowen’s nomination, however, was more controversial as demonstrated by its approval by a recorded vote of 48-46. Senators David Vitter (R-LA) and Thad Cochran (R-MS) made public their reservations about Bowen’s nomination, which they attributed to her role as Chair of the Securities Investor Protection Corp. (“SIPC”) when the decision was made that SIPC would not compensate victims of Allen Stanford’s Ponzi scheme.
Two days after approval of the nominations by the Senate, on June 5, Mr. Massad was sworn in as Chairman. Ms. Bowen was sworn in on Monday, June 9, and Mr. Giancarlo’s swearing in is soon to come.
The current Commission is Chairman Timothy Massad, Commissioner Sharon Bowen, and Commissioner Mark Wetjen, who are Democrats, and Commissioner Scott O’Malia, who is a Republican. Upon the swearing in of Christopher Giancarlo, the Commission will be filled for the first time since the departure of Commissioner Jill Sommers in July 2013, whose seat will be filled by Mr. Giancarlo.
Former Chairman Gary Gensler placed strong emphasis on the importance of an aggressive Division of Enforcement and routinely referenced the negative impacts of what he viewed as inadequate funding on enforcement efforts, even stating that Enforcement had to “shelve cases” due to resource constraints. Interestingly, one of the first actions Chairman Massad took upon being sworn in was appointing Aitan Goelman as Director of Enforcement. Mr. Goelman is a former federal prosecutor and partner of Zuckerman Spaeder LLP.
With a new Commission in place, over the coming days and months market participants will begin to see the priorities of the new Chairman. He is expected to address two issues that have been the subject of much controversy – the position limits rule, which was proposed in December 2013, after the previously finalized rule was vacated by the District Court for D.C., and the CFTC’s cross-border guidance, which is the subject of a lawsuit filed in December 2013 by three large trade groups (Securities Industry and Financial Markets Association, International Swaps and Derivatives Association, Inc., and Institute of International Bankers). In addition, it is expected that Mr. Massad will take steps to provide market participants certainty around regulation by making the multiple no-action letters issued by various CFTC Divisions into Commission rules. Specifically, energy companies should follow developments related to the definition of swap, particularly volumetric options and trade options, as well as continued implementation of the End-User exception from clearing and trading. Market participants should also be keen to observe the dynamic among the new Commission when they meet publicly.