I Office OfThe Ins cctor General 

_AIG 
 Commodity f 1itumTr>dlnJ; CotDmluion 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Office of the Inspector General 

Three Lafayette Centre 


1155 21st Street, NW, Washington, DC 20581 


Telephone: (202) 418-5110 


Facsimile: (202) 418-5522 


March 30, 2017 

TO: J. Christopher Giancarlo, Acting Chairman 

Sharon Y. Bowen, Commissioner 

FROM: Judith A. Ringle, Deputy Inspector General and Chief Counsel ,..__R_ 

SUBJECT: Investigation into Potential Violation of 18 U.S.C. § 208 - Acts Affecting a Personal 

Financial Interest 

Attached is an OIG report of investigation into an allegation that an employee may have a conflict 

between his duties and his financial interests. The matter was referred by the Office of General Counsel 

Ethics group. We are recommending no action be taken against the employee. We are recommending 

enhancements to the financial disclosure review process. 

Please keep in mind that this version ofthe report is confidential and un-redacted; we are 

available at your convenience to discuss. 

Attachments: ROI with Attachment #1 and Addendum 

Cc (with attachment): 	 A. Roy Lavik, Inspector General 

Daniel Davis, General Counsel and CFTC Designated Ethics Official 
U.S. Commodity Futures Trading Commission 

Office ofthe Inspector General 

UNREDACTED 


and CONFIDENTIAL 


Investigation into Potential Violation of 18 U.S.C. § 208: 


Acts Affecting a Personal Financial Interest 


Prepared by the 

Office ofthe Inspector General 

Commodity Futures Trading Commission 

March 30, 2017 

This Report has been redacted by the Commodity Futures Trading Commission under 

Freedom ofinformation Act Exemptions 4 and 6, 5 U.S.C. §552(b)(4) and (6), not by 

the CFTC OIG. 
U.S. Commodity Futures Trading Commission UNREDACTED 


Office ofthe Inspector General and CONFIDENTIAL 


Table of Contents 

Background ..................................................................................................................................... 3 


Scope & Methodology .................................................................................................................... 4 


Statutes and Regulations ................................................................................................................. 4 


Findings........................................................................................................................................... 5 


Employee History and Interactions with Ethics Officials ........................................................... 5 


Stock in ............................................................................................................ 8 


Employee's Work Product .......................................................................................................... 9 


Project One - eports ..................................................................................... 9 


Project Two ­ ............................................................................ 9 


Project 11rree- - Reports.................................................................................... 1 O 


Project Four- ­ ......................................................................................................... 11 


Conclusion and Recommendations ............................................................................................... 11 

U.S. Commodity Futures Trading Commission UNREDACTED 


Office ofthe Inspector General and CONFIDENTIAL 


BACKGROUND 

18 U.S.C. § 208 broadly prohibits government employees from participating personally 

and substantially in matters where the employee has a financial interest.' 18 U.S.C. § 216 

prescribes penalties: violation of 18 U.S.C. § 208 is a misdemeanor, and a ''willful" violation 

may constitute a felony with a maximum sentence offive years.2 

On September 13, 2016, the ethics office3 at the Comrnodi Futures Trading 

Commission ("CFTC") held its annual training Immediately 

after the training, an employee self-reported to at may constitute a 

violation of 18 U.S.C. § 208. 

The em lo ee was hired in 

At s time, e emp oyee's spouse own approximately 

$50,000 o~tock. - is charged with the regulation 

~had- in the course ofhis normal duties - been assigned matters 

involving_..... 

After the training and conversation with ethics officials, the employee decided to sell the 

stock. The employee completed the sale the next day; by September 15, 2016, he had notified 

CFTC ethics officials that his spouse was divested ofall stock in On November 

8, 2016, the ethics officials presented these facts to the Office ofthe Inspector General ("OIG"). 

Because the potential violation was no longer ongoing, the Inspector General determined to 

prioritize other matters. On February 28, 2017, the Inspector General opened an investigation. 4 

1 18 U.S.C. § 208(a): Except as permitted by subsection (b) hereof, whoever, being an officer or employee ofthe 

executive branch ofthe United States Government, or of any independent agency of the United States, a Federal 

Reserve bank director, officer, or employee, or an officer or employee ofthe District ofColumbia, including a 

special Government employee, participates personally and substantially as a Government officer or employee, 

through decision, approval, disapproval, recommendation, the rendering ofadvice, investigation, or otherwise, in a 

judicial or other proceeding, application, request for a ruling or other determination, contract, claim, controversy, 

charge, accusation, arrest, or other particular matter in which, to his knowledge, he, his spouse, minor child, general 

partner, organization in which he is serving as officer, director, trustee, general partner or employee, or any person 

or organization with whom he is negotiating or has any arrangement concerning prospective employment, has a 

financial interest- Shall be subject to the penalties set forth in section 216 of this title. 

2 18 U.S.C. § 216(a) The punishment for an offense under section 203, 204, 205, 207, 208, or 209 of this title is the 

following: (1) Whoever engages in the conduct constituting the offense shall be imprisoned for not more than one 

year or fined in the amount set forth in this title, or both. (2) Whoever willfully engages in the conduct constituting . 

the offense shall be imprisoned for not more than five years or fined in the amount set forth in this title, or both. 

3 CFfC's ethics office is in the Office ofGeneral Counsel. Information on the ethics program is available to all 

CFfC employees at: http://cftcnet/Operations/ Additional-Services/Ethics/Pages/default.aspx. 


4 OIG has independent authority to investigate all instances offraud, waste, and abuse within the agency. Inspector 


General Act of 1978 § 4. Citations to confidential sources have been removed from this report. 


3 

U.S. Commodity Futures Trading Commission UNREDACTED 


Office ofthe Inspector General and CONFIDENTIAL 


SCOPE & METHODOLOGY 

Our investigation began with a review ofdocuments provided by the ethics officials. We 

then researched 18 U.S.C. § 208 and related ethics regulations. Because the employee had selfreported, we elected to treat the inquiry as non-criminal and began our interviews with the 

employee. The employee cooperated fully. At the end ofthe interview, we requested additional 

documents, including trading records and copies ofcertain wo~k-product. 

We interviewed the employee's supervisors, as well as staffin-the 

and the Office ofGeneral Counsel. We completed our investigation by 

examining the employee's trading records and assessing the impact, ifany, that his work may 

have had on We detennined not to refer this matter to the Justice Department, 

and we do not recommend any action against the employee. 

STATUTES & REGULATIONS~ 

The following statutes and ethics regulations apply.6 

18 U.S.C. § 208,7 Acts Affecting a Personal Financial Interest This statute prohibits: 

(1) An employee ofan independent agency ofthe United States Government; 

(2) From participating personally and substantially in a matter; 

(3) Which to his knowledge; 

(4) The employee or spouse has a financial interest. 

SC.F.R. § 2635.101,8 Basic Obligation ofPubli~ Service. Sets forth responsibility offederal 

employees to adhere to certain ethical p~ciples. When a circumstance is not expressly covered, 

it places the burden on the employee to apply the principles to determine whether their conduct is 

proper. 

S C.F.R. § 2635.502,9 Personal and Business Relationships. Sets forth responsibility offederal 

employees to avoid appearance ofconflict ofinterest. Regarding work on matters related to a 

financial interest, requires employees not to participate in the matter ifa reasonable person with 

knowledge ofthe relevant facts would question the employee's impartiality. 

5 According to an ethics official, CFrC has no internal policies directly on point However, there are "guidance 


documents" produced and distributed semi-regularly by the ethics office to keep CFTC employees informed oftheir 


ethical responsibilities. We have not reproduced these here. 


6 Our summaries are intended as a guide for the reader and not as formal legal interpretations ofthe relevant statute 


or regulation. 


7 See supra n. l. Available at: https://www.law.comell.edu/uscode/text/18/208. 


8 Available at: https://www.law.comell.edu/cfr/text/S/2635.101. 

9 Available at: httos:Uwww.law.comell.edu/cfr/text/5/2635.502. 

4 

U.S. Commodity Futures Trading Commission UNREDACTED 

Office ofthe Inspector General and CONFIDENTIAL 

17 C.F.R. § 140.735-2a,10 Prohibited Interests. Prohibits employees from holding certain 

financial interests. 17 C.F.R. § 140.735-2a(d)(l) provides an exception to the general rule, 

permitting retention or passive acquisition ifthe interest was obtained prior to employment with 

CFfC or acquired by a spouse prior to marriage. 

FINDINGS 

We have divided our findings into three sections. First, we present the employee's 

history and his interactions with ethics officials. Second, we analyze the stock held in­

- And third, we review the employee's work product to detemrine the impact his work 

may have had, ifany, on and the value ofhis investment. 

Employee History and Interactions with Ethics Officials 

remains in this position as ofthe date ofthis report. 

On joining the CFTC, the employee filed the required paperwork, including an Entrance 

Fonn 450 (''2014 fonn"). The 2014 fonn shows that the employee reported his wife's holding of 

$55,000 in tock, noting: '..stock-spouse 401(k)- $55k."11 

The employee also affirmatively notified an ethics official ("Ethics Official #1). 12 In an 

email titled ''New hire - existing stock holdings," the employee wrote: 

My supervisor [Name] suggested I contact you. I am a new employee that started 

yesterday. 

My wife still holds about $50,000 of stock in her 40l(k). She is a 

-ormer employee and never sold it. The CFTC regulates- Do we have to 

sell the stock immediately from her 401 (k)? 

IO Available at https://www.law.comell.edu/cfr/text/17/140.73S-2a.

11 The form requires the employee to "[i]ndicate the full name ofeach specific asset or investment You may add 

the ticker symbol to the full name." While the employee's use of~ does not comply with the instructions to list 

the "fitll name," we do not view the employee's decision to use an acronym as material. 

12 The employee reached out with the same questions to an official in Human Resources on 

We have no record ofa response, but the question was correctly directed to the ethics office. We would not expect 

Human Resources to voice an opinion. 

s 

U.S. Commodity Futures Trading Commission UNREDACTED 

Office ofthe Inspector General and CONFIDENTIAL 

The employee has no record ofa response from Ethics Official #1. The ethics official 

searched his email for relevant records, and found neither this email from the employee 

nor a response. 

After submission ofthe 2014 form by the employee, the form was signed by a first-line 

ethics official ("Ethics Official #2) on November 25, and by Ethics Official #1 as the final 

reviewing official on December 9, 2014. 

Above the signature box for the two ethics officials, the form reads: "On the basis of 

information contained in this report, I conclude that the filer is in compliance with applicable 

laws and regulations, except as noted in the 'comments' box below." The comment box is blank. 

In January of2015, the employee filed another Form 450 ("2015 form") as part ofthe 

CITC's annual recertification ofits employees' financial interests. This 2015 form lists the 

stock in the same manner as before. Eleven months later, in November of2015, 

another ethics official ("Ethics Official #3) emailed the employee some questions about the 

13 employee's responses on the 2015 form. However, Ethics Official #3 had no questions specific 

to the employee's entry ofhis wife's stock in On December 28, 2015, Ethics 

Official #3 signed the employee's 2015 form. Ethics Official #1 signed the same day, again as 

the reviewing official. The instructions above the signature box had not changed. The comment 

box is again blank. 

Though the 2015 form had already been signed, the email exchange between the 

employee and Ethics Official #3 continued through January of2016. On January 10, the 

employee sent an email summarizing his understanding ofhis ethical responsibilities. Though 

there is no record ofEthics Official #3 as.king about the tock, the employee 

volunteered that: 

marriage~

Shedoes~tock,

her departure 

but that was 

from~

a~

and 

c) prior to my starting with the CFTC - Slide 24 in the ethics training 

says the prohibited interest rules do not apply to interests acquired prior to my 

CITC employment and acquired by my spouse before we were married, both are 

true. 

13 The complete email string is included as Attachment I. The most relevant ofthe questions was a request for 

confinnation that "all mutual funds underlying your wife's 401(k) plan include non-diversified assets." See 

Attachment 1, email dated November 30, 2015, 10:44 a.m. This led to a request for the most recent statement from 

the 401 (k). The ethics official had seen a prior statement from the 40 l (k), and this statement had included them 

stock. See Attachment 1, email dated November 30, 2015, 4:40 p.m. 

14 The signature ofthe "final reviewing official" remains the same as in 2014; however, the first-line ethics official 

was new. Accordingly, three ethics officials had now signed offon the employee's Form 450 that states that his 

wife holds ·-tock- spouse 40 l (k) - $55k." 

15 Slide 24 ofthe ethics presentation shows exceptions to the prohibited interest rule - which are ifthe assets were 

{l) acquired prior to working at the CFfC or (2) acquired by spouse before marriage. Regulation available at: 

https://www.law.comell.edu/cfr/text/17 /l 40. 735-2a. 

6 

U.S. Commodity Futures Trading Commission UNREDACTED 


Office ofthe Inspector General and CONFIDENTIAL 


Am I all set? I didn't think any ofthese ositions would require me to recuse 

myself from issues dealing with specifically. I'm not in 

fany 

kind. Let me know ifyou think otherwise. 1 

. 

Ethics Official #3 responded simply: "Thank you so much." 17 There is no record 

offurther communication by the ethics office on this issue. 18 

Also on January 10, 2016, the employee filed his third Fonn 450 ("2016 fonn"), 


again as part ofthe CFTC' s annual recertification of employees' financial interests. This 


year, the employee described the stock in greater detail. The 2016 form 


reads: '-tock-spouse 401(k) - $5Sk- acquired prior to marriage ~dmy 


hire at CFTC in 2014." 19 


On February 29, 2016, an ethics official ("Ethics Official #4") signed the 2016 


fonn. Ethics Official # 1 signed on March 2, 2016, as the final reviewing official. The 


comment box was again blank. 


~2016,the ethics office held its annual ethics training­

- Immediately afterwards, the employee sent an email to the ethics 

official ("Ethics Official #5") who had led the ethics training. 20 

Thanks for the ethics training today. 

[Ethics official #3] never specifically responded to my conflict ofinterest 

question below regarding my wife's interests in Could someone 

check and get back to me? I'm a II and a 450 filer. 

[Wife's name] (spouse) retains approximately $50k of.stock in her 401k at 

.,plus a small defined benefit pension. No positions, to my knowledge, have 

been added or subtracted from those accounts since she left •in-besides 

16 Email from employee to ethics official dated January 10, 2016. This email closely tracks the language ofCFTC 

supplemental regulation 17 C.F.R. § 140.735-2a(d)(l), which provides an exception to prohibited interests rules for 

financial interests acquired by a spouse prior to marriage or prior to start at the CFTC. This was also referenced on 

the ethics presentation Slide #24. 


17 Email from ethics official to employee dated January 11, 2016. 


18 Neither the employee nor Ethics Official #3 was able to locate a response. 


19 This language tracks both slide #24 from the 2015 training and the email sent that same day to Ethics Official #3. 


20 Email from employee to Ethics Official #S dated September 13, 2016. One or more oral conversations with 


Ethics Official #S occurred just before or after this email. Interviews suggest that the content ofthe email broadly 


mirrors the content ofthe conversations. 


7 

U.S. Commodity Futures Trading Commission UNREDACTED 


Office ofthe Inspector General and CONFIDENTIAL 


the small dividend check she receives (it's paid in cash to her, not reinvested in 

lllstock). I left- in - [] and joined CFTC - 2014. 

The closest I've ever come to an - ssue was a question from 


to in 2015 about 


a ist o proposed questions to ask. I never contacted directly 

about the issue and I never heard about the resolution ofthe issue. Last worked 

on it in Sep 2015. 

proposal was made in the report, nor did I pers 


recommendation in the report. I have never 


any reason for any registrant or non registrant). 


A) 	Do I have to recuse myselffrom all- elated matters because ofher 


positions/interests? 


B) 	She's considering closing the 401k and moving it to an account at - Do I 


need a special form before she does so? 


Thanks, 


[Employee] 


A conversation ensued between the Ethics Official #5 and the employee. Ethics Official 

#5 documented the conversation later that same day with a memo to file. This memo states that 

during the conversation, the employee decided to sell the stock. On September 15, 2016, the 

employee emailed Ethics Official #5 that the sale was complete; his wife was entirely divested of 

stock in 

Stock in 

The employee's wife held the stock in her 40l{k). She acquired it over 

the course ofher career at which ended in •. The employee provided a 

snapshot ofthe account from••••l2014 to March 9, 2017, covering his period of 

employment at CFTC. 

On- 2014, the account value was $58,640.90. No trading occurred during 

the employ~e CFTC. Quarterly dividends were paid out in cash until late 2015, and 

reinvested starting in January 2016. The account was closed on September 14, 2016, with a 

transfer of$54,936. Excluding dividends, the account lost approximately $4,000 during the 

8 

U.S. Commodity Futures Trading Commission UNREDACTED 

Office ofthe Inspector General and CONFIDENTIAL 

employee's time at CFTC. This figure of $54k represented approximately one-third ofthe total 

account value. 

Employee's Work Product 

The employee worked on four main projects that involved We briefly 

21 outline each project below. 

Pro"ect One 

21 We relied on our interviews for these descriptions. 

22 

9 
U.S. Commodity Futures Trading Commission UNREDACTED 

Office ofthe Inspector General and CONFIDENTIAL 

assigned him the project 

asked the employee for his opinion. The emplo 

a number ofquestions to ask The employee says that his role 

was relatively minimal, and th.at he never heard back. As of the date ofthe interview over a year 

later, he was unaware ofthe result, ifany, from his work on this project. 

with whom the employee worked confirmed the employee's recollection. 

When asked to name the staff who worked on the project, neither named the employee without 

being prompted. They described the project as primarily one of and viewed 

his assistance as minor. They stated that the employee was aske 

- not because ofany experience specific to 

~leverinfonned the employee ofthe final result; indeed, they themselves 

never learned what came oftheir work. 

The em loyee described his role as relatively small; he worked as art of a team that 

10 

U.S. Commodity Futures Trading Commission UN REDACTED 


Office ofthe Inspector General and CONFIDENTIAL 


The employee has spoken to staff- includin 

provided examples ofthe conversations, including: 

However, this project had only just 

started when the employee's wife complet e sa e o stock on September 14, 2016. The 

employee's continued involvement in this or other matters related to could no 

longer conflict with a personal financial interest. 

CONCLUSION AND RECOMMENDATIONS 

We find tha~e's second day ofwork, he had communicated his wife's 

holding ofstock in- to his supervisor, the ethics office, and the Human Resources 

office. In the email to Ethics Official #1, the employee clearly and concisely described the 

situation at issue in this investigation, and asked whether he needed to sell the position. He 

received no answer. 

We find that the employee continued to receive no answer for two years. He disclosed 

the stock in 2014, 2015, and 2016, and each year the Form 450 was signed without question or 

comment on his wife's stock. In 2015, the employee again took the opportunity to affirmatively 

11 

U.S. Commodity Futures Trading Commission UNREDACTED 

Office ofthe. Inspector General and CONFIDENTIAL 

ask an ethics official about his wife's holding o~His concerns continued to go 

unaddressed. 

The employee states that he believed the lack ofresponse by ethics officials meant that 

his .wife's holding o~stock, and his participation in various matters involving 

was permitted. We find this assertion credible under the circumstances. 

We find that the employee self-reported immediately after attending ethics training in 

September of2016. Ethics Official #5 engaged with the employee on the matter, and within one 

day the position had been liquidated. 

We find that the stock in-nstitutedapproximately one-third ofthe 

value ofthe portfolio, and that th~eduring the employee's tenure at CFTC.27 

We find that the employee's work was unlikely to have a material - or even noticeableimpact on-rits stock value. We believe neither the substance nor the number 

ofprojects worked on by the employee involving raises an appearance issue in 

this case. · 

We decline to refer this matter to the Justice Department for possible prosecution. We 

believe that under the facts ofthis investigation, no reasonable person could conclude that the 

employee had acted willfully in this matter; accordingly, there can be no felony. In our 

experience, a U.S. Attorney would be equally unlikely to consider prosecution for a 

misdemeanor. 

What remains is the possibility ofan administrative penalty imposed by the Chairman. 

We note for the Chairman's consideration SC.F.R § 2635.107(b), which may be summarized as 

stating that no disciplinary action will be taken against an employee for violation of 

supplementary agency regulations who has engaged in good faith reliance on the advice ofan 

agency ethics official. 

We also note SC.F.R. § 2640.101-03, which helps to implement 18 U.S.C. § 208. It 

explains that the statute intends to prevent an employee from allowing personal interests to affect 

his official duties. We find no evidence to suggest that the employee's personal interest affected 

his official duties. We therefore decline to recommend disciplinary action against this 

individual. . 

We recommend that the Chainnan take appropriate action given our findings. Please 

refer to Appendix "Other Matters" for supplemental observations & recommendations. 

27 We note, however that this is in DO way dispositive ofthe employee's impact OD That is, value 

could decrease in a situation where an employee acted improperly to limit losses. 

12 

Attachment #1 


From: [ethics official #3] 


Sent: Monday, January 11, 2016 9:22 AM 


To: [employee] 


Subject: RE: Form 450 


Thank you so much! 

[ethics official #3] 

From: [employee] 


Sent: Sunday, January 10, 2016 5:46 PM 


To: [ethics official #3] 


Subject: RE: Form 450 


Finally logged intollsite. Statements for my wife's retirement savings at 

attached. 


Defined Benefit Pension : 


Owed approx. $402.51/month starting in 2033 


401k: 


I don't believe any of these funds meet the definition you provided below of sector 


funds. None focus on "investments in any industry, business, single country." Some focus on 


specific market capitalization sectors, but that is not included in your definition of sector funds, 


and therefore none of these need to be reported on 450, in my opinion. 


She does hold tock, but that was all acquired a) prior to our marriage-


and b) prior to her departure from - and c) prior to my starting with the 


CFTC in 2014. Slide 24 in the ethics training says the prohibited interest rules do not apply to 


interests acquired prior to my CFTC employment and acquired by my spouse before we were 


married, both are true. 


http://cftcnet/Operations/Additional

Services/Ethics/ layouts/PowerPoint.aspx?PowerPointView=ReadingView&Presentationld=/Op 


erations/Additional­


Services/Ethics/Documents/CFTC%20Annual%20Ethics%20Training%202015%20(0N­


LINE).ppt&Source=http%3A%2F%2Fcftcnet%2FOperations%2FAdditional%20Services%2FEthics 


%2FPages%2Fdefault%2Easpx&DefaultltemOpen=1 


­

Am I all set? I didn't t hink any of these positions would require me to recuse myself from issues 


specifically. I'm not and have not been involved in 

any of any kind. l et me know if you think otherwise. 

1 
From: [employee] 


Sent: Monday, January 04, 2016 10:28 AM 


To: [ethics official #3] 


Subject: RE: Form 450 


Just an update. My wife called. over the break and they are mailing her a new PIN so she can 


log onto the pension and 401k system. We're waiting for them to mail the PIN . 


From: [ethics official #3] 


Sent: Monday, December 14, 2015 12:15 PM 


To: [employee] 


Cc: [ethics official #3] 


Subject: RE: Form 450 


Please don't worry, are not fun. I had one recently also. I'll wait for you 

to get this infonnation, 

Feel better. 

[ethics official #3] 

From: [employee] 


Sent: Monday, December 14, 2015 12:01 PM 


To: [ethics official #3] 


Subject: RE: Form 450 


I know I owe you updated info on my wife's portfolio. Been recovering from so 


I've been out of it. 


She hasn't made any buy/sells in the plan, it's passive. I need to get her to focus and log into 


the..ite t o get the current holdings; I don't have direct access. She has the 401k portfolio 


you saw, and we t hink she might be ent itled to a very small defined benefit pension plan. I was, 


but I took a lump sum buyout shortly after I left. All of my. related holdings are gone. 


From: [ethics official #3] 


Sent: Monday, December 07, 2015 3:31 PM 


To: [employee], 


Cc: [ethics official #3] 


Subject: RE: Form 450 


[Employee]: 

I wanted to check if you had a chance to locate a more recent statement of your 

wife's 401(k) plan. Ifit is difficult to locate and you think that the portfolio has 

remained essentially the same, I will just make a notation to this effect. Also, in 

2 
your form you noted that you haven't been able to access 


deferred compensation website. Please let me know whether that's still the case; 


otherwise~ I will need to know the nature ofthis plan (e.g. pension, retirement plan, 


or stock option) and what it includes. 


Please let me know ifyou have any questions. 

Thanks much for your help, 

[ethics official #3] 

From: [ethics officfal #3] 


Sent: Monday, November 30, 2015 4:40 PM 


To: [employee] 


Cc: [ethics official #3) 


SUbject: RE: Form 450 


[Employee]: 

Thank you for the clarifications. 

To confirm that the assets remain the same, it might be helpful ifyou could locate 

the most recent statement for your wife's 40l(k) Plan. One ofthe reasons is that, 

for example, [company] no longer appears to offer its [name]-fund, which is 

listed in the current account statement dated April-June 2014. 

In response to your question regarding non-diversified assets, ethics regulations 

distinguish between diversified and sector (non-diversified) mutual funds: 

• 	 A diversified mutual fund is one that does not have a stated policy of 

concentrating its investments in any industry, business, single country other 

than the U.S., or bonds ofa single U.S. state. Diversified assets are not 

reportable in Form 450. 

• 	 A sector, or non-diversified, mutual fund is one that has a stated policy of 

concentrating its investments in any industry, business, single country other 

than the U.S., or the bonds ofa single U.S. state. Sector (non-diversified) 

funds must be reported in Form 450. 

3 
Please note that, for next year's filing, it would be helpful if you could list any 

sector funds, or other relevant assets, as part ofForm 450 itself, as opposed to 

providing account statements. 

Also, ifit is easier for you, I will input the name of your wife's 40l(k) plan for 

you, just let me know how you would like me to proceed. 

Thank you, 

[ethics official #3] 

From: [employee] 


Sent: Monday, November 30, 2015 1:03 PM 


To: [ethics official #3] 


Subject: RE: Form 450 


2. 

3. 

4. 

5. 	 What do you mean by "non-diversified assets?" This is an older run of her portfolio but 

she hasn't changed it. I've asked her to track down a more current copy. 

6. 	 How do I do that? When I click open on the Feb 17 2015 Form 450 this is all I see: 

4 
------------------------ - --

,.­

,£' 1 https · emat.cftc.gov·fonm Fo1m'.'1e .. cr.a; p· 

:1_: View Form 

fi le £dit Yiew F_2vorites Iools !::!elp 

i 

_ I _ Ethics Management and Tracking - .e>. ­

My Dashboard Administration Help ,.. 

View Form 
From: [ethics official #3) 


Sent: Monday, November 30, 2015 10:44 AM 


To: [employee] 


Cc: [ethics official #3) 


Subject: Form 450 


Dear: 

I am reviewing your recent financial disclosure Fonn 450 and would like to clarify certain 

information: 

5. 	 Finally, could you confirm that all mutual funds underlying your wife's 401(k) plan 

include non-diversified assets. 

6. 	 In addition, please list your wife's 401(k) plan in Part IV, Agreements and Arrangements. 

Please let me know ifyou have any questions and I will be happy to assist you. 

Thanks much, 

[ethics official #3] 

6 

Addendum - Other Matters 

During our investigation, other issues arose which concerned us. 

Ethics Records 

We are concerned that our investigation found records ofemails from an employee 

seeking ethics advice - but no record ofany responses. 

We have previously recommended that ethics officials make and keep records oftheir 

advice. 1 We believe this would help to eliminate confusion for CFTC employees. Given our 

findings offact in this investigation, we renew this recommendation. We further recommend 

that ethics officials implement a system to track open/unanswered requests for ethics advice. 

Lack ofRole for Supervisors in Identifying and Preventing Conflicts ofInterest 

In our interviews with ethics officials, we learned that some employees at CFTC have 

investments in sectors under the jurisdiction and oversight ofCFTC. This creates the potential 

for material conflicts ofinterest. We also learned that supervisors play no role in the financial 

disclosure process; and specifically, that supervisors have no role in proactively helping to 

identify and prevent potential conflicts ofinterests by their direct reports. Ethics officials told us 

that they ~ot know what each employee in every Division is presently working on, nor what 

each employee may be assigned over the course ofthe year. 

We agree. 

Coordination with supervisors appears an essential - and missing - element ofthe review 

process. Intermediate approval offinancial disclosure forms by supervisors would improve 

efficiency and help to prevent conflicts ofinterest. It should streamline the financial disclosure 

review process for all (including supervisors), as it will avoid the distraction ofanswering 

questions from ethics officials each year. In addition, ifa supervisor knows in advance, from 

their intennediate review offinancial disclosure forms, which employees should be recused from 

assignments based on employee holdings, supervisors could properly assign work at the outset. 

We believe this missing element may lead to conflicts ofinterest, both deliberate and 

unintended, in appearance and in fact. 

1 See Investigation into an Allegation ofIllegal Trading by a CFTC Employee ofthe Commodity Futures Trading 

Commission, dated February 11, 2015.