Summary: GAO reviewed the major programs of the Commodity Futures Trading Commission (CFTC) which ensure the integrity of futures markets and protect customers. The review showed that reparations and other forums for resolution of customer claims need to be made more effective, and reparations claims processing has proved to be too lengthy. Only a few individuals have received money as a result of reparations decisions, and complainants have difficulty understanding the reparations program. Arbitration is potentially an effective and attractive alternative to reparations. However, arbitration panels are perceived as having a pro-industry bias, many customers do not know that they exist, their jurisdiction is limited to disputes which concern members' actions on their own exchange, and there is an unrealistically low ceiling on the size of a claim which customers can compel exchange members to arbitrate. CFT needs to improve reparations program management, simplify its operation, and support the development of arbitration at the exchanges and the National Futures Association. Congress should raise the limit for claims for which customers can compel arbitration. Congress should also clarify whether customers have a private right of action to adjudicate commodity-related claims in Federal court. CFTC should compel registration of salespersons and supervisors who solicit business. It could require merchants to sponsor and review the registration application of persons associated with their firms and fingerprint registrants for Federal Bureau of Investigation review. CFTC should periodically check registrants' eligibility for registration. Qualification standards and proficiency testing could also help CFTC protect futures customers. CFTC needs to take a more active role in the planning for transfer of registration functions to the National Futures Association. Congress should amend the Commodity Exchange Act to authorize the National Futures Association to register all futures professionals, screen and test them, and act as an appellate body in registration decisions. CFTC has not efficiently overseen the exchanges' implementation of their audit and financial surveillance programs, nor has it planned adequately for the transfer of audit functions to the National Futures Association.
