To establish a Civil Monetary Penalty Collection Program. To advise The Federal Claims Collection Act of 1966 and the Debt Collection Act of 1982 (31 U.S.C. 3711 et seq.) place responsibility for collecting debts due the United States on adininistrative agencies. Title 4 of the GAU Policy and Procedures Manual and the Federal Clains Collection Standards (4 CFR Parts 101-105) provide additional guidance on collecting debts. III. SCOPE AND APPLICABILITY This instruction applies to all organizational elements of the CFTC. IV. OBJECTIVES The objectives of the Civil Monetary Penalty Collection program are to provide: A. Sufficient internal controls to properly account for payments. B. Sufficient docuinentation of the collection process. C. For the establishment of the most efficient and least costly collection methods. cies. Although we do not have regular arrangements to provide such services, the need occasionally arises. In addition to reimbursements for CFTC travel on behalf of the Justice Department, etc., we anticipate that the need could arise for short-term details to other agencies. Should there be any earned reimbursements in fiscal year 1986, the funds would be credited back to our appropriation for salaries and expenses. RESPONSIBILITIES UNDER THE FUTURES TRADING ACT OF 1982 Mr. WHITTEN. Please list all the new responsibilities implemented during fiscal year 1984 that were the result of the Futures Trading Act of 1982. Ms. PHILLIPS. While many of the responsibilities under the Act were implemented in FY 1983, other responsibilities were either implemented in FY 1984 or continued to have a significant impact on FY 1984 resources. I will provide a list of these responsibilities for the record. [The information follows:) On April 23, 1984, rules streamlining the reparations process, which were allowed under revised Section 14 of the Act, were implemented. Commission regulations on speculative limits were reviewed in light of amended Section 4a. Contract market designation procedures were revised in response to amended Section 6. Regulations were adopted which set procedures for the states to notify the Commission, pursuant to Section 6d, of actions brought in federal or state court for vio lations of the Commodity Exchange Act. A variety of service fees, allowed by revised Section 26, were implemented during FY 1983. During FY 1984, fees were instituted for exchange rule enforcement re views, filing reparations complaints and appeals, registration of leverage contracts, audits of leverage transaction merchants, and registration of leverage transaction merchants and their associated persons. As authorized under Section 17, the Commission continued its coordination with the National Futures Association (NFA). In addition to its other oversight functions during FY 1984, the Commission granted NFA the authority to distribute registration expiration dates and the authority to register all categories of registrants other than floor brokers, leverage transaction merchants and associated persons of leverage transaction merchants. Regulations were proposed to exempt certain entities from the definition of the term "pool" as discussed in the Report accompanying the 1982 Act. To implement amendments to Section 8a, the Commission issued regulations revising its registration procedures, implementing procedures for temporary licensing of associated persons and statutory disqualification. A State/Federal liaison unit was created to assist other government agencies in bringing actions allowed under the “open season" provision of the 1982 Act, amended Section 12. The Commission established a pilot program for the trading of agricultural options as allowed under amended Section 4c. A study of large hedgers in the cattle, hog and pork belly markets was completed in January 1985. A study of trading by persons possessing non-public information was completed in September 1984. A study of the effects of futures trading, in conjunction with the Federal Reserve Board and the SEC, was completed in December 1984. Regulations governing leverage transactions, as required by amended Section 19, were issued. Regulations to effectuate amended Section 8 concerning disclosure of information were issued. As allowed under amended Section 4(b), the Commission issued proposed regulations governing the offer and sale of foreign futures contracts in the United States. A study of the operations of NFA, required by amended Section 26, was begun. AGRICULTURAL OPTIONS ADVISORY COMMITTEE Mr. WHITTEN. Please provide the current membership, and the plan of work for 1985 for the Agricultural Options Advisory Committee. Ms. PHILLIPS. In January, 1985, the Commission reconstituted the Agricultural Options Advisory Committee as an Agricultural Advisory Committee, with a broader membership and a more general mandate to advise the Commission on issues affecting agricultural producers, processors, lenders and others interested in or affected by the agricultural commodities markets. The Committee also serves to facilitate communications between the Commission and the diverse agricultural and agriculture-related groups represented on the committee. On March 14, 1985, the expanded committee held its first meeting under the amended charter. The meeting included briefings by Commission staff on the functions of the Commission and discussions of agricultural trade options and the Commission's proposed rules on audit trails for futures and options transactions. Commissioner Hineman, who chairs the committee, plans to recommend that the Commission schedule another committee meeting in June, 1985 in order to continue the discussion of these and other agricultural issues. I would be happy to submit for the record a list of current members of this committee. [The information follows:] The advisory committee is currently composed of the following members: Commissioner Kalo A. Hineman, Committee Chairman; Stanley Forbes, American Bankers Association; Dean Kleckner, American Farm Bureau Federation; Roy Smith, American Soybean Association; David Schoeder, Farm Credit Council; Weldon V. Barton, Independent Bankers Association of America; Darl Kleinbach, National Association of Wheat Growers; Sewell L. Spedden, National Broiler Council; H. Richard Farr, National Cattlemen's Association; Harold Cutler, National Corn Growers Association; James H. Sanford, National Cotton Council of America; Harold Richards, National Council of Farm Cooperatives; Paul Nauer, National Farmers Organization; Marv Hanson, National Farmers Union; Dewayne Bloem, National Grain and Feed Association; Peter A. Kooi, National Grain Trade Council; Lester Wallace, The National Grange; Wayne Walter, National Pork Producers Council; E. Robert Kern, Millers National Federation; Harold S. Hukins, North American Export Grain Association; John Goss, American Cotton Shippers; and Tommy B. Willis, American Agriculture Movement. Mr. WHITTEN. What is the annual operating budget and source of revenue for this Committee? Ms. PHILLIPS. The Commission has not established an annual operating budget for the Agricultural Advisory Committee. The source of revenue for this committee is the Commission's general appropriations. The cost of operating this committee is significantly low since committee members have agreed to serve without compensation and without allowances or reimbursement for travel expenses or per diem in connection with attending committee meetings. In fiscal year 1984, the Agricultural Options Advisory Committee expended $100 for transcription services and other minor incidental costs. The Commission man-hours expended on this advisory committee in fiscal year 1984, all of which were provided by regular Commission employees as a part of their normal duties, totaled less than $3000 in salary. The total cost of the Agricultural Advisory Committee in fiscal year 1985, including a salary figure to reflect Commission man-hours spent on the committee, should exceed $7500. Mr. WHITTEN. What recommendations, if any, did the Advisory Committee have for fiscal year 1984? Ms. PHILLIPS. The options advisory committee provided the Commission with insights into policy alternatives and useful information on the practical considerations which would be involved in an agricultural options pilot program, making several valuable recommendations on appropriate limitations to the program for its pilot stage. The Committee enabled the Committee to receive the viewpoints of representatives of those persons who would be the primary participants in the Commission's agricultural options pilot program. These viewpoints were enlightening, since the Commission itself had had no prior experience with agricultural options, and were considered by the Commission in proposing and adopting regulations to permit the trading of options on domestic agricultural commodities. STATUTORY DISQUALIFICATION FROM REGISTRATION Mr. WHITTEN. We note that last year you established a system for statutory disqualification from registration. Has anyone fallen into this category? Ms. PHILLIPS. Regulations establishing procedures to implement the system of statutory disqualifications from registration adopted by Congress in the Futures Trading Act of 1982 became effective in April 1984. The statutory disqualification provisions of the Act themselves took effect on January 11, 1983. The Commission believes that the identification of these disqualifications in the Act and the procedures established thereunder have deterred a significant number of individuals from applying for registration in the first instance. Nonetheless, since January 1983, approximately 320 applicants for registration have been identified as being subject to a statutory disqualification significant enough to deny registration. The vast majority of these applications are withdrawn prior to the initiation of an administrative proceeding under the regulations. Nonetheless, since the adoption of the regulations, eleven proceedings have been initiated to deny or revoke registration. In addition, prior to the adoption of final regulations, the Commission, by order, initiated proceedings similar to those established in the regulations to revoke the registration of ten floor brokers who had been convicted of wash trading and tax fraud. LEVERAGE RULES Mr. WHITTEN. During 1984, you approved interim final rules for certain leverage transactions. When do you expect those to go final? Ms. PHILLIPS. On January 16, 1984, the Commission did approve interim final rules for the regulation of certain leverage transactions. Those regulations were published in the Federal Register on February 13, 1984, and generally became effective on April 13, 1984. By their terms, these rules applied only to leverage contracts which involve a leverage customers purchasing a contract from a leverage transaction merchant (or a "long" contract). When adopting the interim rules, the Commission indicated that it intended to give further consideration to whether leverage transactions in which the customers sells a contract to a leverage transaction merchant-a so-called "short" leverage contract-should also be subject to regulation under the interim rules. After receiving additional public comments and the advice of its staff of this issue, the Commission on June 12, 1984, determined to amend its interim rules to encompass short leverage transactions. As a result, the Commission on January 2, 1985, published in the Federal Register certain technical amendments to the interim rules to accommodate the regulation of short leverage contracts on essentially the same basis as long leverage contracts. These technical amendments became effective on February 1, 1985. In addition, on January 2, 1985, the Commission published for public comment certain additional substantive amendments to the interim final rules. At present, the staff is reviewing the comments received, and is preparing the additional substantive amendments for adoption by the Commission in the near future. REPARATIONS SEMINARS Mr. WHITTEN. The Commission, on February 14, 1984, adopted final rules designed to streamline its reparations process. The Commission staff has held several regional seminars to explain the new rules to the regulatory community. For the record, please list how many regional meetings there were, how many attendees there were, generally, where were these attendees from, and how much did these regional meetings cost. Ms. PHILLIPS. There were two regional seminars held to explain the Commission's new reparation rules, one in Chicago, Illinois, held on April 11, 1984, and the other in New York, New York, on April 13, 1984. There were approximately fifty persons in attendance at the Chicago seminar, and thirty persons at the New York City seminar. The attendees at both seminars were predominantly attorneys specializing in commodities regulation. The Chicago seminar cost $1,047.25. The New York City seminar cost $477.55. Both of the foregoing cost figures reflect the combined expenses for four CFTC employees. NFA/CFTC RELATIONSHIP Mr. WHITTEN. For the record, please give us a rather detailed explanation of the relationship between the National Futures Association and the Commodity Futures Trading Commission. Ms. PHILLIPS. I will provide this explanation. Section 17 of the Commodity Exchange Act permits the registration of futures associations under standards prescribed in the Act. Unlike trade associations or other non-regulatory enterprises, futures associations that register with the Commission have explicit self-regulatory obligations with respect to their members. The first and, to date, only registered futures association is the National Futures Association, which was granted registration by the Commission in September 1981. |