CFTC STAFF TECHNICAL COMMENTS RE:

CONSUMER FINANCIAL PROTECTION AGENCY ACT PROPOSED BY THE

SENATE COMMITTEE ON BANKING, HOUSING & URBAN AFFAIRS

Explanation:

The Consumer Financial Protection Agency Act of 2009 ("CFP A Act") as proposed by the
Senate Committee on Banking, Housing & Urban Affairs would vest the new consumer
protection agency ("Consumer Agency") with a very broad mandate. In its White Paper on
Financial Regulatory Reform, the Treasury Department addressed the potential jurisdictional
overlap between such a Consumer Agency and the CFTC: "We propose the creation of a single
federal agency, the Consumer Financial Protection Agency, dedicated to protecting consumers in
the financial products and services markets, exceptfor investment products and services already
regulated by the SEC or CFTC."l To effectuate this purpose, with respect to CFTC-regulated
entities, Section 1024(h)(1) of the CFPA Act (page 917, lines 4-15) provides the following
exclusion for persons regulated by the CFTC:

No provision of this title shall be construed as altering, amending, or affecting the

authority of the Commodity Futures Trading Commission to adopt rules, initiate
enforcement proceedings, or take any other action with respect to a person
regulated by the Commodity Futures Trading Commission. The CFPA shall have
no authority to enforce this title with respect to a person regulated by the
Commodity Futures Trading Commission.

However, the definition of a "person regulated by the Commodity Futures Trading Commission"
in Section 1002(21) of the CFPA Act (page 857, lines 9-18) is restricted to an exclusive list of 4
categories of specifically enumerated CFTC registrants:

The term "person regulated by the Commodity Futures Trading Commission"

means any futures commission merchant, commodity trading adviser [sic],
commodity pool operator, or introducing broker that is subject to the jurisdiction
of the Commodity Futures Trading Commission under the Commodity Exchange
Act, but only to the extent that the person acts in such capacity.

By restricting the definition of a "person regulated by the Commodity Futures Trading

Commission" to those 4 enumerated categories of registrants, other categories of entities subject
to CFTC jurisdiction would be covered by the CFPA Act. These could include, for example:

1 Department of the Treasury, Financial Regulatory Reform: A New Foundation; Rebuilding

Financial Supervision and Regulation at 55-56 (June 17,2009) (emphasis added).

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 1) Retail Foreign Exchange Dealers - a new category ofCFTC registrant created by the
"Farm Bill" of 2008 specifically to enable the CFTC to regulate and prosecute retail
fraud involving foreign currency contracts sold by such entities."

2) Futures Exchanges and Clearinghouses - including floor brokers, who deal with
individuals trading futures and commodity options;' and

3) New Categories ofCFTC Registrants - the possibility that future legislation could
create new categories of CFTC registrants.

Also, the CFPA Act's definition of a "person regulated by" the CFTC is more limited than its
corresponding definition in Section 1002(22) of a "person regulated by" the SEC (page 857, line
19 through page 858, line 23), as follows:

1) A "person regulated by" the SEC includes securities exchanges and clearinghouses,
whereas futures exchanges and clearinghouses are not included in the definition of a
"person regulated by" the CFTC;

2) The definition of a "person regulated by" the SEC includes employees, agents, and
contractors, whereas the definition of a "person regulated by" the CFTC does not.

Recommendation:

(a) CFTC staff suggests a technical change to the wording of the definition of a "person
regulated by the Commodity Futures Trading Commission" in the CFPA Act to delete the
references to specifically enumerated entities. This could be accomplished by amending
the definition (page 857, lines 9-18) as follows:

"(21) PERSON REGULATED BY THE COMMODITY FUTURES TRADING

COMMISSloN.-The term "person regulated by the Commodity Futures Trading
Commission" means any person that is subject to the jurisdiction of the
Commodity Futures Trading Commission under the Commodity Exchange Act,
but only to the extent that the person acts in such capacity."

(b) Alternatively, CFTC staff suggests that the definition of a "person regulated by"
the CFTC in the CFPA Act be made parallel to the corresponding definition of a

2 See Section 2(c)(2)(B)(i)(II)(gg) of the Commodity Exchange Act, 7 US.c.

2(c)(2)(B)(i)(II)(gg), as enacted by the Commodity Futures Trading Commission
Reauthorization Act of2008, Title XIII of the Food, Conservation and Energy Act of2008, Pub.
L. No. 110-246, 122 Stat. 1624 (June 18,2008).

3 See Section la(16) of the Commodity Exchange Act, 7 US.c. la(16).

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 "person regulated by" the SEC. This could be accomplished by amending the
definition (page 857, lines 9-18) as follows:

"(21) PERSON REGULATED BY THE COMMODITY FUTURES TRADING

COMMISSloN.-The term "person regulated by the Commodity Futures Trading
Commission" means a person who is-

(A) a futures commission merchant that is required to be registered or

exempt from registration under the Commodity Exchange Act;
(B) a commodity trading advisor that is required to be registered or
exempt from registration under the Commodity Exchange Act;
(C) a commodity pool operator that is required to be registered or exempt
from registration under the Commodity Exchange Act;
(D) an introducing broker that is required to be registered or exempt from
registration under the Commodity Exchange Act;
(E) a retail foreign exchange dealer that is required to be registered or
exempt from registration under the Commodity Exchange Act;
(F) a floor broker that is required to be registered or exempt from
registration under the Commodity Exchange Act;
(G) a registered entity as defined in Section 1a of the Commodity
Exchange Act, 7 U.S.C. 1a;4 and
(H) any employee, agent, or contractor acting on behalf of, registered with,
or providing services to, any person described in any of subparagraphs
(A) through (G), but only to the extent that the person, or the
employee, agent, or contactor of such person, acts in a regulated
capacity."

The proposed amendment, in either alternative, would preserve the CFTC's jurisdiction over
entities covered by the Commodity Exchange Act. This would fulfill the objective of ensuring
that the respective jurisdictions of the CFTC and the new Consumer Agency do not overlap.

4 The term "registered entity" is defined in the Commodity Exchange Act to include futures
exchanges, derivatives clearing organizations, and certain electronic trading facilities provided
for in the statute. The proposed "Over-the-Counter Derivatives Markets Act of2009" also
would define an alternative swap execution facility as a "registered entity" as well.
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