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* Whistleblowers filed complaints in August 2011
* Complaints cite management style, improper outside contact
* CFTC passed position limits on Oct. 18 by 3-2 vote
By Christopher Doering
WASHINGTON, March 6 (Reuters) - The Commodity Futures Trading Commission's internal watchdog found agency employees working on its controversial position limits rule did not engage in wrongdoing, downplaying allegations by whistleblowers of misconduct.
The CFTC's Office of the Inspector General conducted a preliminary investigation into allegations last year that the leader of the team writing the position limits rule was undermining the effort by removing senior employees and trying to push an unworkable rule.
The complaints revealed internal strife at the agency that is crafting dozens of reforms included in the 2010 Dodd-Frank financial reform law.
The position limits rule, which curbs excessive speculation in the commodity markets, has been among the most politicized. Regulators are under immense pressure to try to keep down fuel prices ahead of the November elections.
"We found no evidence to sustain a preliminary finding of wrongdoing by any individual connected with the position limits and large swaps trader reporting rulemakings," the inspector general's report said.
"No witness presented evidence of corruption or violations of law in connection with the drafting of the position limits rule by the team lead or any other person who worked on the rule."
The allegations, filed in August of last year, said the agency's team leader for position limits "sneakily" got himself appointed to the role, and soon after removed more experienced members in order keep newer members who could be more easily manipulated.
The anonymous sources also asserted the team leader engaged in improper communications with outside sources, and crafted a rule that would not work because it was not compatible with another CFTC measure on large swaps trader reporting.
In its 35-page report, the inspector general's office said it found no evidence to support these allegations. The investigation involved interviews with CFTC officials, including Gary Gensler, the chairman of the agency. (PDF of report: r.reuters.com/keb96s)
"Due to the uniform quality of information received from CFTC employees and management, we did not take steps to refer this matter for further investigation," the report found.
The CFTC's groundbreaking position limits rule, contested in courts by the financial industry, aims to restrict the number of contracts a trader can hold in 28 commodities including oil. The measure was narrowly approved by the agency's five commissioners on Oct. 18 by a vote of 3-2. (Reporting by Christopher Doering; Editing by Lisa Shumaker)