On July 25, the House Agriculture Committee held a hearing to examine the recent failures of MF Global and Peregrine Financial and the implementation of Dodd-Frank. Walt Lukken, president and chief executive officer of the FIA, testified before the committee and outlined the FIA’s recommendations for strengthening customer funds protections. These recommendations include: 1) Providing regulators with the independent ability to electronically review and confirm customer segregated balances at futures commission merchants; 2) Creating an automated confirmation process for segregated funds; 3) Creating an “FIA Information Portal” to centrally house firm-specific financial and related information so customers can better evaluate an FCM; and 4) Public certifications from FCMs that they are in compliance with the Initial Recommendations for Customer Funds Protection that the FIA issued in February. In his discussion of Dodd-Frank implementation, Lukken highlighted several areas of concern for FIA members and warned that there are still many uncertainties that are preventing the industry from implementing the Commodity Futures Trading Commission’s rulemakings. He pointed in particular to the large trader reporting requirements, the need for guidance on the details of the position limits rules, certain operational issues related to the implementation of the new LSOC framework for cleared swaps, and the “complex and confusing” regulatory scheme for cross-border application of Dodd-Frank. Lukken also warned that the costs of implementing the requirements of Dodd-Frank are being exacerbated by CFTC rule proposals that are unrelated to Dodd-Frank, and urged policymakers to concentrate on the highest priority reforms.
