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Frank Bars Staff From Ex-Aide Who Resigned to Join Derivatives Outfit

In a rare move for a lawmaker, House Financial Services Committee chairman Barney Frank announced Thursday that he has prohibited his staff from having any contact with a former aide who joined a company that operates derivatives exchanges after playing a key role in writing last year’s derivatives legislation.

The Massachusetts Democrat said in a release he agrees with critics who raised conflict of interest questions about Peter Roberson, who left the committee in February to become vice president of government relations at the IntercontinentalExchange Inc. ICE operates futures and over-the-counter derivatives exchanges and clearinghouses.

Roberson’s move was reported in The Bond Buyer in February. Along with his derivatives expertise, Roberson also was charged with overseeing legislation related to the municipal securities market.

Under the financial regulatory reform legislation that Roberson worked on and the House approved late last year, most derivatives would have to be centrally cleared and exchange traded. The bill would give regulatory jurisdiction for most interest swaps to the Commodity Futures Trading Commission rather the Securities and Exchange Commission, over which the Financial Services Committee has jurisdiction. For muni derivatives, the bill would not restrict small municipal issuers from entering into such transactions, in contrast to a bill pending in the Senate.

“When Mr. Roberson was hired, it never occurred to me that he would jump so quickly from the committee staff to an industry that was being affected by the committee’s legislation,” Frank said. “When he called me to tell me that he was in conversations with them, I told him that I was disappointed and that I insisted that he take no further action as a member of the committee staff. I then called the staff director and instructed her to remove him from the payroll and provide him only such compensation as is already owed.”

Frank added that he does not believe the current one-year moratorium on interaction with committee staff who become industry lobbyists is adequate, and has therefore instructed the staff to have “no contact whatsoever with Mr. Roberson on any matters involving financial regulation for as long as I am in charge of that committee staff.”

“Fortunately, examples of staff members doing what Mr. Roberson has done are rare, but even one example is far too much and that is why I wanted to make clear I share the unhappiness of people at this, and my intention to prohibit any contact between him and members of the staff for as long as I have any control over the matter,” Frank said.

Kelly Loeffler, vice president of investor relations and corporate communications at ICE, declined to comment.

Prior to joining the House committee in March 2007, Roberson worked as a policy director at the Securities Industry and Financial Markets Association.

While Roberson will be banned from contact with the House committee, he will be able to work with Senate staffers involved in a separate financial regulatory reform package that cleared the Senate Banking Committee last month, sources said. The House approved its bill in December.

While Frank has said the derivatives provisions in his bill are not as strong as he would have liked, he attributed any regulatory loopholes to a lack of votes among committee Democrats. Roberson was not in a senior enough position to craft industry-friendly language on his own, according to one source.

At the same time, proposed OTC derivative regulations are much tougher in the Senate than in the House, including provisions meant to protect unsophisticated states and localities from engaging in derivatives. Under the Senate bill, states and localities would not be “eligible contract participants” in transactions if they have less than $50 million of “discretionary investments,” excluding bond proceeds. The House includes the same $50 million floor, but provides an exemption if the counterparty is a bank or broker-dealer, meaning that virtually all municipalities could engage in derivatives.

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