CFTC Commissioner O’Malia's Dissenting Statement on the Delegation of Enforcement Authority (with Lofchie Comment)

CFTC Commissioner Scott O'Malia released a dissenting statement regarding the request by the CFTC Division of Enforcement ("DOE") for the authority to authorize an investigation without the approval of the Commission. Commissioner O'Malia stated that he supports a robust investigation procedure, but objected to waving the Commission's power to authorize an investigation in a post-Dodd-Frank environment. The Commissioner stated his concern that, if the power of investigation is delegated to DOE staff, the Commission will be unaware of the full ramifications of the new untested laws. Furthermore, O'Malia said that the DOE's request is an attempt to circumvent the powers of the Commission, as it proposes to bring investigations on a summary basis through an absent objection process. The Commissioner said that he believes the CFTC should preserve its "powers as an independent agency, and review each enforcement matter on its own merits."

(On the more technical side, we note that appears that the CFTC Part 11 rules relating to investigations do give DOE staff authority to initiate investigations-but not to issue subpoenas-without Commission approval. See in particular CFTC Rule 11.2 (relating to investigations) andRule 11.4 (relating to subpoenas).)

Lofchie Comment: To be the subject of an enforcement action or even an investigation is, in the case of an individual, potentially devastating personally and career-ending professionally, regardless of the outcome of the investigation. In the case of a business, being the object of an investigation threatens the ability of the business to survive, again, regardless of the eventual outcome of the investigation. Accordingly, I would agree with Commissioner O'Malia that the authority to approve an investigation is not something that should be delegated to the staff of DOE. Rather, DOE should have to demonstrate, at least before a somewhat more impartial audience, that there is sufficient evidence to proceed on a course of action that has the potential for so much damage. On a further practical note, I would think that, given the expense of conducting an investigation, the Commission would want to assure that its resources were under its control and that so much spending authority was not delegated to staff.

See: Commissioner O'Malia's Dissent.See also: O'Malia's Additional Statement on His Dissent.