The Commodity Futures Trading Commission has requested comments on proposed amendments to the definition of “public director” in the acceptable practices previously adopted for designated contract market (DCM) Core Principle 15. The acceptable practices, which would operate as a “safe harbor,” would require the inclusion of public directors on a DCM’s board of directors and regulatory oversight committee, as well as the inclusion of public members on DCM disciplinary panels. The implementation of this aspect of the Core Principle 15 acceptable practices was stayed by the CFTC in November 2007, due to uncertainty regarding the appropriate scope of the “public director” definition.
The proposed amendments retain as the central element of the “public director” definition a materiality test, under which a public director must be found to have “no material relationship” with the applicable DCM. However, the amendments would revise the supplemental “bright line” tests, which set forth certain relationships that were to be considered material per se. Generally, the revisions would narrow the application of the bright line tests by removing certain categories of persons from the bright line exclusions. The CFTC emphasized, however, that this is intended merely to shift the point of analysis back to the general materiality test for those categories of directors.
The comment period for the proposed amendments closes on February 20, but the stay of the acceptable practices remains in effect until further notice by the CFTC.