ICI, Chamber appeal CFTC mutual fund rule

Agency wants funds using commodities to register with it

Dec 28, 2012 @ 9:57 am

The U.S. Chamber of Commerce is seeking to appeal a judge's decision to uphold a rule by the Commodity Futures Trading Commission requiring mutual funds with commodities investments to register with the agency.

The Chamber of Commerce and the Investment Company Institute filed a notice of appeal today in federal court in Washington, seeking to ask an appeals court to reverse a Dec. 12 ruling by U.S. District Judge Beryl Howell that the CFTC acted properly and within its authority when it issued the rule.

Howell, writing in a 93-page opinion, rejected arguments by the chamber of commerce and the institute that the rule is unnecessary, and that the commission didn't properly assess the costs and benefits when it approved the regulation in February.

“The district court's decision fell far short of well- established D.C. Circuit precedent requiring agencies to adequately measure the costs imposed by capital markets regulations on businesses, investors and the economy as a whole, and to weigh them against the desired benefits,” David Hirschmann, president and chief executive officer of the chamber's Center for Capital Markets Competitiveness, said in an e-mailed statement.

Stephanie Allen, a CFTC spokeswoman, declined to comment on the notice of appeal.

The case is one of several brought by the financial industry as it pushes back against tighter regulations passed in the wake of the 2008 credit crisis. On Nov. 8, CME Group Inc. (CME), the world's largest futures market, sued the commission to challenge cleared-swaps reporting requirements imposed under the Dodd-Frank Act.

Futures, Swaps

Investment companies have “increased significantly” their use of commodity futures, swaps and options since the agency determined in 2003 that they didn't need to register as “commodity pool operators,” CFTC Chairman Gary Gensler said when the rule was passed.

Under the rule, funds would have to file reports with the CFTC about their use of leverage, exposure to risk from counterparties and other investment trading data.

The groups argued the measure isn't needed because mutual funds are already overseen by the Securities and Exchange Commission.

The case is Investment Company Institute v. U.S. Commodity Futures Trading Commission, 1:12-cv-00612, U.S. District Court, District of Columbia (Washington).

-- Bloomberg News --

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