On January 21, 2021, CFTC Chairman Heath Tarbert stepped down as Chairman of the agency and, for the time being, stepped into a Commissioner role. The CFTC was very active during Chairman Tarbert’s tenure as it implemented his regulatory and enforcement priorities. In particular, the Division of Enforcement saw the highest volume of enforcement actions in the CFTC’s history. The CFTC also finalized a number of major regulatory developments in 2020, including its long-awaited rule imposing position limits for derivatives (see our blog post summarizing this final rule).
On the same day, the CFTC Commissioners unanimously elected Commissioner Rostin Behnam, the longest serving Democratic commissioner, as Acting Chairman of the CFTC. During his tenure as Acting Chairman, it is likely that Behnam will prioritize climate risk issues, particularly as he sponsored the CFTC’s Climate-Related Market Risk Subcommittee, which issued the Managing Climate Risk in the U.S. Financial System report. This report provides a range of recommendations to manage climate risk in the financial sector and previews policies that the CFTC may pursue in the Biden Administration. For example, the report recommends that the CFTC consider expanding its risk management and disclosure requirements for swap dealers to incorporate climate-related risks.
As of this writing, media reports suggest that Christopher Brummer, a professor at Georgetown Law School, will be nominated to serve as Chairman of the CFTC. Brummer is an expert on financial technology, including digital assets, and accordingly a CFTC under his leadership would focus on these issues.
Regardless of who becomes permanent Chairman, the shift to Democratic leadership at the CFTC will affect all of the agency’s activities. A Democratic-majority CFTC could take aim at politically controversial rules that passed on narrow margins, such as the position limits final rule, swap dealer capital rules, and certain cross-border regulations. The newly constituted CFTC could vote to roll back or rewrite these rules. A Democratic Congress could try to use the Congressional Review Act to block recent rulemakings from taking effect, although doing so would prevent the CFTC from passing rules that are “substantially the same” in the future, and it is unclear whether that result would be acceptable to the closely divided 117th Congress. Finally, the CFTC Division of Enforcement is likely to maintain or increase its intensive pace of aggressive investigations.