US CFTC dwindles further as Berkovitz plans October departure

The US Commodity Futures Trading Commission member Dan Berkovitz said he will step down Oct. 15 to "turn to other challenges," potentially leaving the derivatives regulator with only two sitting commissioners pending further nominations and Senate confirmation.

While the departure could slow actions by the independent commission, it comes at a generally quiet time in terms of votes on new regulations directly affecting energy sector derivatives.

When the commission is down to two members, it can still take actions, but that requires both members, a working majority, to be in agreement, said Matthew Kulkin, a former CFTC division director, who co-chairs a financial services group at the law firm Steptoe.

"For the last 20 years I have had the privilege of working with, and for, the Commodity Futures Trading Commission, as well as the US Congress and the private sector, to strengthen the integrity of our financial markets," Berkovitz said in a statement Sept. 9. "Legislation enacted in 2008 to 'close the Enron loophole' and the subsequent passage of the comprehensive Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated legislative gaps that permitted excessive market speculation and contributed to the 2008 financial crisis."

As a result of CFTC action since 2010, including issuing rules to implement the Dodd-Frank act, Berkovitz said US derivatives markets are "stronger than ever."

Berkovitz previously served as general counsel at the CFTC from 2009 to 2013 and also worked as a senior staff lawyer for the Senate Permanent Subcommittee on Investigations under former Senator Carl Levin, Democrat-Michigan, where Berkovitz played a key role in a June 2006 staff report that found speculation played a part in rising oil prices.

The two remaining seated commissioners are Democrat Rostin Behnam, the acting chairman, expected to be President Joe Biden's nominee for the permanent chair and Republican Dawn Stump. Republican Commissioner Brian Quintenz recently stepped down from the commission.

Berkovitz's planned departure adds to pressure for the White House to put forward nominations to bring the CFTC to its full complement of five members.

"There is never a good time to leave, but commissioners have limited terms," Berkovitz said in an email Sept. 10, responding to a question about the timing. "The agency is in a transition now, so it is also the right time for me to transition." His term would have expired in April 2023.

Kulkin noted that Berkovitz is staying on until after the end of the fiscal year, helping to see the commission through September, which is historically a busy month for tying up enforcement cases and settlements. Having only two members tends to slow things down at the commission, particularly if the members are not in agreement, Kulkin said. In addition, there would be Sunshine Act limitations on the remaining two commissioners speaking directly to one another without a public meeting.

As commissioner, Berkovitz has been an active voice in key energy derivates regulations such as the measure setting position limits and is the sponsor of the Energy and Environmental Markets Advisory Committee, which has recently examined the role of carbon markets in the transition to a low carbon economy.