The US Commodity Futures Trading Commission elected Commissioner Michael V. Dunn as its acting chairman on Jan. 20. A day later, he listed five priorities for the CFTC until Gary Gensler, President Barack H. Obama's nominee as chairman, is confirmed.
Dunn succeeded Walter L. Lukken whose resignation as acting chairman took effect on Jan. 20 but who will remain on the commission. Although Lukken's term as a commissioner runs until 2010, he said on Jan. 15 that he is exploring other opportunities.
In his Jan. 21 statement, Dunn paid tribute to Lukken's leadership during a challenging period for the commission. "While a great deal of progress has been made, a tremendous amount of work remains to be done, work which requires immediate attention. While I expect Chairman Nominee Gary Gensler to experience a swift confirmation process, there are five areas of concern that, I believe, we cannot fail to address," Dunn said.
In the area of consumer protection, he said that current economic problems call for re-evaluating derivatives regulation to ensure adequate transparency and oversight of markets.
"However, in pursuing broad reforms, we cannot forget that the CFTC still face legal challenges in its ability to protect retail consumers from commodity fraud. While we are considering broad systemic reforms, we must ensure we are doing all we can to protect consumers and their financial investments," he said.
Identify, manage risks
Dunn said that the CFTC also needs to make sure it can identify and manage risks associated with new types of derivative markets and products. "Our current regulatory model has worked well to ensure the financial integrity of exchange-traded instruments, but we need to be looking ahead for potential trouble spots and risks that may arise in the future. To do this, I will encourage the agency to establish a risk advisory committee to assist the CFTC in identifying and addressing areas where improvement in its oversight is absolutely critical," he indicated.
He also said that the CFTC needs to collaborate more closely with other regulatory agencies. "Today, there are already a number of hybrid products such as securities futures, exchange-traded futures or swap contracts that involve the jurisdiction of several agencies. Even without legislation, agencies involved can do a far better job of working together to ensure customers and markets are protected while avoiding unnecessarily duplicative regulatory regimes," Dunn said. While the CFTC has made progress in signing memorandums of understanding with other agencies governing the sharing of information, it needs to look for further opportunities, he added.
He said that the CFTC also needs to move forward with the review of conditions under which it grants exemptions for entities to exceed speculative position limits and other hedge exemption policies which it has already begun. "It needs to seek public input on possible alternatives to granting exemptions and steps that might or should be taken to increase transparency in the markets," Dunn said.
Finally, the CFTC needs to make sure that it receives the necessary funding to address the challenges it faces, the new acting chairman said. "With the likelihood of increased agency authorities and responsibilities, combined with a restricted budget, it is imperative that the CFTC obtain increased funding immediately to avoid serious impairment of [its] ability to protect the markets and customers who use them from fraud and abuse. I fully intend to continue the CFTC's efforts to ensure that its budget is commensurate with its increased regulatory challenges," he said.
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