Associations Submit Opposition to CFTC Motion to File Supplemental Declaration in SIFMA v. CFTC Cross-Border Guidance Case
Commentary by Bob Zwirb
SIFMA, ISDA and the Institute of International Bankers (the "Associations") submitted to the Court an opposition to the CFTC'srecent motion to file a supplemental declaration ("Motion") in the lawsuit filed against the CFTC Cross-Border Guidance.
The CFTC's supplemental declaration consisted of a declaration from CFTC Assistant General Counsel, Martin B. White, and two additional documents that, according to the CFTC, contradict "the positions SIFMA and other Plaintiffs have taken on key legal points in this case." Specifically, the two exhibits include (i) a document titled "Note Regarding Non-U.S. Affiliate Participation in Swaps Market" ("SIFMA Note"), and (ii) a copy of an article published by POLITICO Pro titled "Banks Outline Pushback on Swap Guarantee Worries."
According to the Associations, the CFTC Motion should be denied because "[h]earsay statements in a recent news article are not an appropriate part of the Court's record in an administrative rule challenge." Additionally, the Associations stated that the SIFMA Note was intended for internal reference, and not for public filing or distribution.
Moreover, the Associations explained that the arguments constructed by the CFTC based on the SIFMA Note are baseless, stating that the SIFMA Note is "irrelevant to this Court's construction of Section 2(i)," and does not, as the CFTC argues, assert that the CFTC's Cross-Border Guidance is guidance just "by using that word once." Further, the CFTC Motion argued that the Associations' standing in the case is undermined by the fact that some of the Associations' members had changed their practices in response to the Cross-Border Guidance, as indicated in the SIFMA Note. According to the Associations, however, this point actually proves their standing since the Associations "indisputably" have standing to challenge regulations that require them to restructure their businesses.
The Associations' stated that ultimately, the SIFMA Note "shows that the regulated public does not view the Cross-Border Rule as mere 'guidance' that may be considered at its option, but rather as a regulatory dictate that imposes overlapping burdens and compels the restructuring of their global business activities."
See: Associations Opposition to CFTC Motion to File Supplemental Declaration.
Related news: Parties Submit Supplemental Briefs in SIFMA v. CFTC Cross-Border Guidance Case (with Zwirb and Lofchie Comments) (July 21, 2014); CFTC Files Supplemental Declaration in CFTC Cross-Border Guidance Case (with Zwirb Comment) (July 17, 2014); Associations Submit Response to CFTC's Notice of Supplemental Authority in CFTC Cross-Border Guidance Case (June 26, 2014); Court Requests Supplemental Briefs from Parties in SIFMA v. CFTC Cross-Border Guidance Case (June 24, 2014); SIFMA v. CFTC Cross-Border Guidance Case Reassigned to New Judge (June 19, 2014); Judge Grants Amici Motion for Leave to File Brief in Support of CFTC; CFTC Submits Notice of Supplemental Authority in SIFMA v. CFTC Cross-Border Guidance Case (with Lofchie Comment) (June 18, 2014); Congressional Democrats' Amicus Brief Sides with CFTC in SIFMA v. CFTC (with Lofchie Comment and Energy Metro Desk Article Quoting Commissioner O'Malia) (March 24, 2014); Better Markets Amicus Brief Supports CFTC's Cross-Border Guidance (with Lofchie and Zwirb Comments) (March 20, 2014) CFTC Legal Memorandum to Dismiss Challenge to Its Cross-Border Guidance (with Lofchie and Zwirb Comments) (March 17, 2014) Chamber of Commerce Submits Amicus Brief Regarding Lawsuit against CFTC Cross-Border Rule (with Zwirb Comment) (February 4, 2014) Market Participants File Amended Complaint Challenging CFTC Cross-Border Guidance (with Zwirb and Lofchie Comments) (January 7, 2014) Market Participants File Lawsuit Challenging CFTC Cross-Border Guidance for Being a Rule Adopted in Violation of the APA (with Lofchie Comment) (December 4, 2013).
Commentary
The central issue in this matter, involving the appropriate classification of the CFTC Cross-Border Guidance, i.e., whether it constitutes a "rule" (subject to the Administrative Procedure Act) or merely "guidance," is an important legal question that should be resolved by careful factual and legal analysis, not by how SIFMA characterized it to its members in private "talking points" or by how the press characterizes SIFMA's characterization. Apparently, the "gotcha" opportunity was too tempting for the CFTC to ignore, compelling it to bring the private communication and press article to the attention of the court. That allowed SIFMA to point out that, notwithstanding the CFTC's argument to the contrary, the Cross-Border Guidance adversely affects the ability of U.S.-based firms with guaranteed affiliates to compete internationally, forcing them to "restructur[e] . . . their global business activities . . . to mitigate [the guidance's] regulatory burdens." In other words, it forces SIFMA's members to undertake a second-best solution to temper the costs of regulation. Forcing members to engage in less than optimal behavior to get around what economists refer to as "government-induced inefficiency" would seem to be injurious in nature, warranting standing in this legal matter.