CFTC Revokes Registrations of a CPO/CTA but Creates Issue of Administrative Law
Commentary by Bob Zwirb
The CFTC announced the revocation of the registrations of Chicago Trading Managers LLC ("CT Managers"). CT Managers had been registered with the CFTC as a CPO and CTA.
On December 27, 2013, CFTC Judgment Officer Philip V. McGuire issued a decision against CT Managers, finding that it was statutorily disqualified from CFTC registration based on a default judgment and permanent injunction order entered by the U.S. District Court for the Southern District of New York on May 15, 2013. Additionally, the default judgment ordered CT Managers to pay a civil monetary penalty of $1.4 million jointly and severally with another defendant.
See: CFTC Press Release; Initial Decision.
Related news: House Appropriations Committee - Draft Committee Report on Agriculture Bill (Including the Future of the CFTC) (with Zwirb Comment) (June 17, 2013); Proceedings before the Commodity Futures Trading Commission; Final Rule (CFTC - Fed. Reg. Version) (with Zwirb Comment) (February 26, 2013).
Commentary
The registration revocations were handled by a Judgment Officer rather than an Administrative Law Judge, which contrasts with the agency's practice since the founding of the CFTC in 1975. In 2012, the CFTC took the extraordinary action of dismissing its in-house ALJ and eliminating that position. Since then, the CFTC has been operating with a lower-level hearing officer who has decided matters that previously were the province of an ALJ. Statutory disqualification cases such as the one discussed above were handled previously only by ALJs, while Judgment Officers handled small claims matters in the CFTC's reparations program. Aside from the policy implications of having an expert administrative regulatory agency operating without an expert presiding officer in administrative and enforcement litigation matters, the CFTC's recent practice of allowing a less trained and non-independent agency employee to preside over serious matters involving registration of market participants also raises concerns implicating the Administrative Procedure Act, which we, the Federal Administrative Law Judges Conference, and the House Appropriations Committee have commented on in the past. See also http://www.pointoflaw.com/archives/2013/08/cftcs-distaste-for-the-administrative-procedure-act.php.