Shutdown Cuts Off Guidance to Firms, Stalls Cases
For New York attorneys who regularly do business with the federal government, last week's shutdown produced a frustrating loss of momentum.
Activity at the Commodity Futures Trading Commission and the International Trade Commission and other agencies largely ground to a halt. Meanwhile, with many government lawyers on furlough, the courts began deferring civil cases, a blow to clients eager for a quick resolution.
Lawyers keeping an eye on the rollout of Dodd-Frank financial regulations were especially concerned about the CFTC.
"The big problem is, here we are, right smack dab in a major regulatory overhaul, really the biggest one since the 1930s, and the key regulator…is not open to accept requests for interpretive relief or to answer questions and help provide guidance," said P. Georgia Bullitt, a partner in Morgan Lewis & Bockius. "That's a tough position to be in particularly since the commission has not been willing to extend compliance dates."
Bullitt said a new rule was implemented on Oct. 2 requiring trading of swap transactions on swap execution facilities or SEFs, which are platforms for derivatives trading.
"There's a sense that there's nobody to reach out to if you've got questions," Bullitt said. "If this continues, it's going to be very problematic. Firms and the clients are going to take different positions" on how to interpret the new rules, she said.
Another Dodd-Frank deadline is Oct. 10, by which time clients must define who is a U.S. person for purposes of cross-border swap activities, a pressing issue for investment advisers, Bullitt said.
"There's this problem with the industry having to identify literally tens of thousands of accounts without any guidance on how to do it or any kind of postponement," Bullitt said, adding that the industry has not heard back from the CFTC staff on many interpretive questions.
Brian Korn, of counsel at Pepper Hamilton, noted that the CFTC website doesn't offer attorneys and the public much information on how it's handling the shutdown.
"You're lacking anybody who is really available for real-time guidance," Korn said. "Guidance from the CFTC is an important aspect for commodities and futures regulations and there are a lot of one-off situations where the practice is to pick up the phone and call the staff."