Commodity Futures Trading Commission (CFTC or Commission) registrants and derivatives market participants should take note of a recent announcement by CFTC Chairman Heath Tarbert that, effective January 1, 2020, "the CFTC will publish all requests for staff no-action, interpretive, and exemptive relief on our website when such relief is granted."1 Requests for staff relief prior to January 1, 2020 will not be affected. This marks the first time, at least since the adoption of the Dodd-Frank Act in 2010, that the CFTC will publish incoming letters requesting agency staff relief.
The chairman's statement does not provide additional details on how the Commission will implement the change. While this new policy is a departure from longstanding Commission practice and will come as a significant shift for those firms who have grown accustomed to working with CFTC staff on relief over the last decade, the Commission's rules already permit – and, in fact, require – the agency to post such incoming materials. This change also will result in the CFTC operating in a manner more consistent with its regulatory obligations, as well as harmonize its approach with that of the Securities and Exchange Commission (SEC) and other federal agencies.
Market participants should reevaluate whether and how they engage with the CFTC in seeking staff relief going forward. In particular, participants may want to more closely consider their rights to seek confidential treatment, as permitted by Commission rules, and carefully analyze the possibility of information being made public under the Freedom of Information Act (FOIA).2
CFTC and SEC Practice
Prior to the start of the new year, and since adoption of the Dodd-Frank Act, which expanded the CFTC's jurisdiction to include over-the-counter swaps, the Commission's practice was to publish to the CFTC's website staff no-action, interpretative, and exemption letters, and other written communications, without the corresponding request for relief. Furthermore, the CFTC maintains a separate website for all staff actions since 2008 and allows visitors to search for letters by different categories, such as letter type, issuing division, and year. Letters going back as far as 1975 are available on the CFTC Staff Letters Archive webpage. It now appears that starting this year the CFTC will include the requesting materials alongside the posted relief.
By comparison, the SEC has long maintained a compilation of staff no-action, interpretive, and exemptive letters from the Divisions of Corporation Finance, Investment Management, and Trading and Markets, and the Office of the Chief Account. On a division-by-division basis, the public can access both the request for relief and the resulting staff action. For example, the SEC's Division of Trading and Markets has published all no-action letters since 2002, with the materials easily searchable by subject matter or category, and arranged in alphabetical and chronological order.
The CFTC's rules set forth a specific manner in which requestors may seek relief, how the staff can determine whether and how to grant that relief, and what protections market participants have from publishing confidential information.
Requests for exemptive, no-action, and interpretative letters
Rule 140.99 sets forth how requests for Commission staff letters are to be made. The rule, among other things, requires that the request must be made by or on behalf of the person subject to the request,3 must relate to a proposed transaction or activity,4 and must set forth as completely as possible all material facts and circumstances.5 The request also must include a specific request for relief, including the Commodity Exchange Act (CEA or Act) provision or Commission rule from which the requestor seeks relief.6 To be sure, some of the specific provisions are less frequently followed in practice (e.g., Rule 140.99(d) requires the request to be an electronic submission to a division-specific email address). When the CFTC staff review a request, the regulations make clear that "[i]ssuance of a [l]etter is entirely within the discretion of Commission staff."7
Importantly, Rule 140.99(h) makes clear that the "[c]onfidential treatment of a request for a [staff l]etter must be requested separately in accordance with § 140.98 or § 145.9 of this chapter, as applicable."8 As further explained below, confidential treatment under Rule 140.98 provides a guarantee of confidentiality for up to 120 days from the time the request is granted or denied (or until such time the relief request is withdrawn), and confidential treatment under Rule 145.9 keeps materials from being released pursuant to a FOIA request – at least until the requestor has had the specified opportunity to contest the materials' release.
Publication of no-action, interpretative, and exemption letters, and other communications
Rule 140.98 requires that "each written response by the Commission or its staff to a letter or other written communication . . . shall be made available, together with the letter or other written communication making the request, for inspection and copying by any person as soon as practicable after the response has been sent or given to the person requesting it."9 The "made available" requirement applies to (i) Commission or staff interpretive legal advice,10 (ii) staff no-action positions,11 and (iii) exemptions from the CEA or CFTC rules not issued pursuant to section 4(c) of the Act.12 It does not apply, however, to "Section 8" materials, referring to Section 8 of the Act,13 which generally protects from public disclosure anything that would "disclose the business transactions or market positions of any person and trade secrets or names of customers."14
Based on this language, it appears that the CFTC practice should have always included the publication of both the "incoming" and "outgoing" materials. In other words, the presumption should have been that the Commission would make available the pair of documents related to any staff action. The chairman's latest announcement, then, simply is bringing the CFTC's practices in line with existing Commission rules.
At the time the relief request is submitted, requestors may seek confidential treatment of the request and the Commission or staff response for up to 120 days after the response is provided.15 The requestor must set forth reasons why confidential treatment should be provided, and Commission staff may agree to this request if it "determines that the request is reasonable and appropriate."16 This explains why the Commission, from time-to-time, publishes a staff letter four months after its issuance; it is because the confidential treatment period has run its course.
If, however, CFTC staff denies the request for confidential treatment, the requestor may withdraw the relief request or other written communications within 30 days and, as a result, the requestor's materials will be not be made public pursuant to Rule 140.98 and the staff will not issue a response.17 The relief request and the other written communications, though, will stay in the Commission's files, and there remains a possibility that the relief request could be released via a FOIA request.
Petition for confidential treatment of information submitted to the Commission
To prevent the automatic disclosure of materials under FOIA, requestors can seek confidential treatment under Rule 145.9. However, this rule does not provide any protection from disclosure when a no-action letter grants or denies the requested relief, and the Commission publishes both the "incoming" and "outgoing" materials.
Under Rule 145.9, a requestor may request in writing that confidential treatment be afforded on the grounds that disclosure of the material submitted:
- Is specifically exempted by a statute that either requires the matters be withheld from the public in such manner as to leave no discretion on the issue or establishes particular criteria for withholding or refers to particular types of matters to be withheld;
- Would reveal the requestor's trade secrets, or confidential commercial or financial information;
- Would constitute a clearly unwarranted invasion of the requestor's personal privacy;
- Would reveal investigatory records compiled for law enforcement purposes whose disclosure would deprive the requestor of a right to a fair trial or an impartial adjudication;
- Would reveal investigatory records compiled for law enforcement purposes whose disclosure would constitute an unwarranted invasion of the personal privacy of the requestor; or
- Would reveal investigatory records compiled for law enforcement purposes when disclosure would interfere with enforcement proceedings or disclose investigative techniques and procedures, provided, that the claim may be made only by a designated contract market, derivatives clearing organization, swap execution facility, swap data repository, or registered futures association with regard to its own investigatory records.18
The written request only must specify the grounds on which confidential treatment is requested. The request need not provide a detailed written justification of the confidential request unless and until the Commission determines that an incoming FOIA request seeks material for which confidential treatment has been requested.19 If that should happen, the requestor may then provide detailed written justification, setting forth the reasons why the information should be withheld, including the applicability of specific statutory or regulatory provisions, prior determinations, or other "additional facts and authorities" as appropriate.20
Market participants need to be prepared, upon making a request for confidential treatment under Rule 145.9, to provide in the future a written analysis supporting the justification. While the justification, alone, may be provided at the time of the request without analysis, the request itself is not sufficient to ensure future confidential treatment of the information. Moreover, market participants should understand that the request for confidential treatment, at the time of submission, does not ensure confidential treatment of that information forever. The request merely protects the information from publication without a request, and provides the market participant with the opportunity, at a future date, to articulate why a request for the information should be denied and the information should remain confidential.
Though market participants should always consider requesting confidential treatment from potential FOIA inquiry, relief request materials that are responded to by the Commission or its staff will be published regardless. As explained above and in the chairman's statement, the Commission is permitted – and, in fact, obligated – to publish the relief request should it grant or deny the relief. The protections afforded under Rule 145.9, then, only affect a relief request that has been withdrawn or where the Commission had not yet acted on it. At that point, any public disclosure of the relief request is controlled by FOIA and Rule 145.9 alone. FOIA protection does not extend to the CFTC's disclosure obligations in litigation.21
Requestors need to clearly mark the confidential treatment request as such and send it to both the division or office receiving the material for which confidential treatment is being sought, and to the assistant secretary of the Commission for FOI, Privacy, and Sunshine Acts compliance.22 Note that Rule 145.9 specifies that the request for confidential treatment is itself a public document, which means Commission staff may furnish it to a person submitting the FOIA request.23 The SEC's FOIA rules, in contrast, treat requests for confidential treatment as non-public documents, unless a request becomes part of a court record.24
Finally, Rule 145.9 sets forth a process by which the appropriate CFTC staff will issue an initial determination with respect to whether the information should be afforded confidential treatment,25 the right of the confidential information submitter and FOIA requestor to appeal to the CFTC general counsel,26 and the process for the general counsel to review a FOIA confidentiality determination appeal.27 This regime gives market participants, and those seeking access to confidential information, a formalized process by which these disputes will be resolved.
Under the new policy announced by Chairman Tarbert, the Commission's practice more closely resembles that of the SEC and other federal agencies. The publication of both the incoming requests and the resulting staff no-action letters also will follow the CFTC's rules governing these materials. But, at the same time, this new approach might change how some market participants go about requesting relief and the information that requestors are willing to include in their submissions to the Commission. Market participants should carefully consider their options for confidentiality and take steps to protect against FOIA inquiries before providing written communications to agency staff.
1 Heath Tarbert, Chairman, US Commodity Futures Trading Comm'n, Statement of Chairman Heath P. Tarbert Before the December 10, 2019 Open Meeting: Tripling Down on Transparency (Dec. 10, 2019).
2 5 U.S.C. § 552.
3 17 CFR § 140.99(b)(4).
4 Id. at § 140.99(b)(3).
5 Id. at § 140.99(b)(5).
6 Id. at § 140.99(c)(2).
7 Id. at § 140.99(b)(1).
8 Id. at § 140.99(h).
9 17 CFR § 140.98(a) (emphasis added).
10 Id. at § 140.98(a)(1).
11 Id. at § 140.98(a)(2).
12 Id. at § 140.98(a)(3).
13 7 U.S.C. § 12.
14 17 CFR § 140.98(c).
15 Id. at § 140.98(b).
16 Id. at § 140.98(b).
17 Id. at § 140.98(b).
18 17 CFR § 145.9(d)(1).
20 Id. at § 145.9(e)(3).
21 US Commodity Futures Trading Comm'n v. Parnon Energy Inc., No. 11 CIV. 3543 WHP, 2013 WL 5882921, at *4 (S.D.N.Y. Oct. 25, 2013), aff'd, 593 F. App'x 32 (2d Cir. 2014).
22 Id. at § 145.9(e)(1).
23 Id. at § 145.9(d)(6).
24 17 CFR § 200.83(c)(8).
25 17 CFR § 145.9(f).
26 Id. at § 145.9(g).
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