The CFTC published its final definition of a Public Director in April, wrapping up the acceptable practices for Core Principle 15 of the Commodity Exchange Act.
Originally published in February 2007, the acceptable practices were defined to include three operating provisions: at least 35% public representation on boards of directors, board-level regulatory oversight committees comprised exclusively of public directors and at least one public director on each disciplinary panel. The CFTC defined public director as having no “material relationship” with a contract market.
It is one thing to require public directors, but how you define “public” or having a “material relationship” is the key.
Here’s how the Commission defines material relationship. It exists if: 1) the director is an officer or employee of the contract market or an officer or employee of its affiliate, 2) the director is a member of the contract market or an officer or director of a member, 3) the director, or a firm with which the director is an officer, director or partner, receives more than $100,000 in combined annual payments from the contract market or any affiliate, or 4) any of these relationships apply to a member of the director’s immediate family (i.e., spouse, parents, children and siblings).
Will this final definition impact current exchange boards? Rachel Berdansky, CFTC deputy director for market compliance says, “This was not a dramatic change and the exchanges have had an active voice in the definition’s development.”
Both ICE and CME Group stated that their boards are in compliance with the rule.