Skylar Sowder, 202.225.4982
I rise today in strong support of H.R. 4413, the Customer Protection and End-User Relief Act. This is a bipartisan bill to reauthorize the Commodity Futures Trading Commission that I introduced, along with my colleagues Ranking Member Collin Peterson and Chairman and Ranking Member of the Subcommittee on General Farm Commodities and Risk Management, Mike Conaway and David Scott.
This bill is years in the making, and I want to thank my colleagues from both sides of the aisle for all of the hard work they have put in to get us to this point.
Throughout this process, the Committee, as well as the Subcommittee on General Farm Commodities and Risk Management, held numerous hearings and heard from a variety of stakeholders with a wide range of perspectives. We heard from end-users representing farmers, ranchers, manufacturers, energy firms and utilities. We heard testimony from every CFTC Commissioner and even foreign regulators. We also heard from exchanges, futures customers, and numerous other market participants.
Ultimately, we developed legislation to reauthorize and reform the CFTC in a way that would not only improve operations at the agency, but also protect customers from another market failure like what we saw with MF Global and PFG Best. Our efforts will also increase certainty in the marketplace and provide a more balanced approach to regulations impacting job creators.
I am proud to say this overwhelmingly bipartisan bill passed unanimously out of the Agriculture Committee by a voice vote.
First of all, H.R. 4413 will better protect farmers and ranchers who use the futures markets to manage their risk by cementing several new and existing protections into law. These protections are designed to restore confidence in the marketplace following the failures of MF Global and PFG Best, where customers who thought their money was safely segregated, suffered severe financial loss due to the illegal use of their funds. Such protections include requiring firms to calculate and report customer account balances electronically to regulators, requiring firms who become undercapitalized to immediately notify regulators, and imposing strict reporting and permission requirements before the movement of customer funds from one account to another.
As for reforms at the Commission, H.R. 4413 reauthorizes appropriations to the agency through 2018. Furthermore, the bill strives to enhance the efficiency of Commission operations and ensure all Commissioners’ voices are heard in the regular order of a well-reasoned rulemaking process.
For example, H.R. 4413 closely follows an executive order issued by President Obama to improve the quality of cost-benefit analysis performed by the Commission prior to promulgating rules; requires division directors to serve at the pleasure of the entire Commission rather than solely at the whim of the Chairman; and clarifies the judicial review process of agency rules. The Commission reform title also calls for the development of a much needed strategic technology plan to enhance market surveillance and interpretation of collected data.
Importantly, H.R. 4413 also provides much needed relief to end-users—those market participants that account for only 10 percent of the swaps market and had nothing to do with the 2008 financial crisis yet represent 94 percent of U.S. job creators—including farmers, ranchers, manufacturers, energy firms and utilities.
During the consideration of the Dodd-Frank Act, Congress clearly intended to exempt end-users from some of the most costly new regulations. However, the CFTC has narrowly interpreted the law resulting in burdensome and often arbitrary compliance requirements which have negatively impacted end-users by making it more difficult and costly to manage risks associated with their businesses.
To address these concerns, H.R. 4413 includes provisions which relieve business owners from arbitrary and costly recordkeeping requirements; allow businesses to continue successful fuel hedging strategies; and to prevent physical delivery of commodities from being unnecessarily regulated as swaps.
H.R. 4413 provides help to America’s job creators by including five carefully crafted measures designed to enhance market certainty which have previously passed the House Agriculture Committee and the U.S. House of Representatives with overwhelming bipartisan support—three of which received over 400 votes in favor!
In closing, the Customer Protection and End-User Relief Act is a wide-ranging, bipartisan CFTC reauthorization bill that provides a blue print for the newly confirmed Chairman and Commissioners to use to make numerous improvements at the Commission, better protect futures customers, and reduce burdens on America’s job creators.
I urge each of my colleagues to join me in supporting this bipartisan legislation. I reserve the balance of my time.