CFTC Chair Timothy G. Massad notified legislators that he will recommend that the CFTC exempt regional grid operators – Regional Transmission Orders ("RTOs") and Independent System Operators ("ISOs") – from all private rights of action under CEA Section 22.
In a letter responding to concerns of certain legislators, Chair Massad acknowledged concerns raised about private actions that "could create costs within markets in ways that regulators do not anticipate." He noted that "several state consumer advocate offices charged with protecting consumers submitted comments asserting that private rights of action could inadvertently introduce regulatory uncertainty and increase costs for consumers."
Chair Massad stated:
While private rights of action will remain critical overall in our markets, I am persuaded that, in this instance, their preservation could result in greater costs and uncertainties without necessarily enhancing supervision of markets or consumer protection.
Chair Massad urged the CFTC to "continue to retain the authority to pursue fraud and manipulation" within RTO-ISO markets. Additionally, he emphasized that the "CFTC's Whistleblower Program also is available to those aggrieved, providing another path for redress."
Commentary / Steven Lofchie
Chair Massad's decision marks a positive step toward recognizing the benefits of limiting CFTC jurisdiction and deferring to the concerns of other regulatory agencies. More steps should be considered. For example, the CFTC should restore the exemption afforded previously to SEC-registered investment companies from being regulated doubly as commodity pools. Such double regulation is unnecessary, imposes needless costs on retail investors in mutual funds that are also regulated as commodity pools, and wastes the CFTC's internal resources as well.
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