September 28, 2022

CFTC Commissioner Pham Calls for Creation of Office of Retail Advocate

Steven Lofchie Commentary by Steven Lofchie

CFTC Commissioner Caroline D. Pham urged the agency to establish an "Office of the Retail Advocate" to promote the CFTC's engagement with the retail public and oversight of retail markets.

At a blockchain financial conference in London, Ms. Pham said that the proposed "Office of the Retail Advocate" would be similar to the SEC Office of the Investor Advocate. Ms. Pham said that while many CFTC offices already engage with the public and promote investor interests, an office specifically designated for retail investor advocacy would "further enshrine the CFTC's current customer protection mandate under Dodd-Frank" in a time of revolutionary financial technologies and markets.

Ms. Pham said that an "Office of the Retail Advocate" would be particularly useful when it comes to the CFTC's oversight of spot cryptocurrency markets. Further, Ms. Pham identified 10 "fundamentals for responsible digital asset markets," including, among other things:

  • identification and regulatory classification of products and services (e.g., determining whether a product is a "novel, native crypto asset or a traditional financial instrument cleverly rebranded but still subject to existing laws and regulations");

  • mitigation of systemic risks and combating illicit finance and national security risks;

  • consumer protection, including in the form of disclosure requirements, suitability requirements and education of retail investors;

  • activity- and entity-based regulation of crypto products and services;

  • addressing conflicts of interest and alignment of market participants' incentives; and

  • promotion of financial innovation and free markets.

Ms. Pham noted that the CFTC's principles-based regulatory framework aligns with many of these fundamentals. She said that the agency is already working to police cryptocurrency markets and protect investors, and will continue to use its broad existing authority to facilitate safe and secure markets. She also emphasized the need for a durable yet flexible technology-neutral regulatory framework that is proactive, not reactive, in order to future-proof regulation and oversight, which she said the CFTC could provide.

Commentary

Commissioner Pham's proposal would position the CFTC well should it obtain authority to become the direct regulator of those digital assets that are deemed to be "commodities." (Currently, the CFTC would only have anti-fraud authority over such products, but the agency is pushing to be granted regulatory authority as well.)

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