Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  



CFTC's Distaste for the Administrative Procedure Act

| No Comments

The Commodity Futures Trading Commission has shown its distaste for the Administrative Procedure Act in connection with regulation. The CFTC avoids the procedural safeguards that are part of the rulemaking process by issuing "non-rule rules". These are staff no-action letters, guidance, and other documents that tell industry what to do, just as a rule would, but don't have the benefit of public comment and regulatory analysis. The CFTC is also cutting procedural corners in other areas.

The agency recently got rid of its administrative law judges and since then has allowed judgment officers to handle responsibilities that formerly were the province of ALJs. Judgment officers are CFTC staffers--not necessarily even lawyers--whose professional future lies in the agency's hands. By contrast, ALJs are trained lawyers, vetted by a separate government agency, who do not answer to the particular agency at which they work. The Administrative Procedure Act designed the ALJ position to be independent of any influence that would bias decisions. A Government Accountability Office (formerly, General Accounting Office) report explained the thinking behind the act that started the ALJ system this way:

The purpose of the act was to ensure fairness and due process in federal agency rulemaking and administrative adjudication proceedings and provide those whose affairs are controlled or regulated by federal government agencies an opportunity for a "formal" hearing on the record before an impartial hearing officer or ALJ. The act sought to ensure the ALJs' judicial capability and objectivity by precluding agencies from evaluating the ALJs' performance and by assigning responsibility for determining their qualifications, compensation, and tenure to the U.S. Civil Service Commission, later the Office of Personnel Management (OPM).

In conjunction with eliminating the ALJ positions, the CFTC changed its rules that once required formal decisional proceedings to be conducted by ALJs to now permit judgment officers to conduct them. Earlier this year, the CFTC made additional changes to its rules to give judgment officers expanded discovery powers and the authority to "carry out the same functions as ALJs in certain proceedings to deny, condition, suspend revoke, or place restrictions on registration." In other words, judgment officers--whose incentives are to please their CFTC colleagues--now have power to make decisions that fundamentally affect people's livelihoods. The Commission can review the judgment officer's decision, but more typically the Commission simply adopts the judgment officer's decision as its own without reviewing it. Congress, the Federal Administrative Law Judges Conference, and others have raised concerns about this change.

The agency's rationale was cost-cutting, and the agency cited the elimination of the ALJs as one of its top fiscal year 2012 accomplishments in an April 2013 submission to Congress. Over the years, the ALJs' caseload had dwindled as the agency's enforcement lawyers opted to go to court in most enforcement matters to take advantage of the more favorable discovery rules. The CFTC may have been correct that it did not need two full-time ALJs, but its solution should not have been to simply rewrite its regulations to eliminate the access of CFTC registrants to impartial decision-makers.

Leave a comment

Once submitted, the comment will first be reviewed by our editors and is not guaranteed to be published. Point of Law editors reserve the right to edit, delete, move, or mark as spam any and all comments. They also have the right to block access to any one or group from commenting or from the entire blog. A comment which does not add to the conversation, runs of on an inappropriate tangent, or kills the conversation may be edited, moved, or deleted.

The views and opinions of those providing comments are those of the author of the comment alone, and even if allowed onto the site do not reflect the opinions of Point of Law bloggers or the Manhattan Institute for Policy Research or any employee thereof. Comments submitted to Point of Law are the sole responsibility of their authors, and the author will take full responsibility for the comment, including any asserted liability for defamation or any other cause of action, and neither the Manhattan Institute nor its insurance carriers will assume responsibility for the comment merely because the Institute has provided the forum for its posting.

Related Entries:



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.