Paul Schott Stevens, president and CEO of the Investment Company Institute (ICI), pointed out Wednesday two initiatives the ICI is fighting: the Securities and Exchange Commission’s (SEC) further attempts to rein in money market funds, and the Commodity Futures Trading Commission’s (CFTC) amendments to Rule 4.5 on commodity pool operators and commodity trading advisors.
With “great reluctance,” Stevens said during his opening remarks at the mutual fund trade group’s annual meeting, “ICI has filed a legal challenge to the CFTC’s amendments of Rule 4.5. We are joined in this action by the U.S. Chamber of Commerce. This is a highly unusual step for us—and not one taken lightly.”
Under Rule 4.5, the CFTC exempts many institutions from its oversight, Stevens (left) said. “The rule essentially says that if you sponsor a pooled investment, and you are well-regulated by another agency, such as the SEC, you don’t need a second layer of regulation from the CFTC.” Under Rule 4.5, “the CFTC has excluded insurance companies, banks and pension plans from its regulatory regime. And since 2003, the CFTC treated registered investment companies and their advisers the same way. After all—what financial product is more comprehensively regulated than mutual funds?”
The CFTC, Stevens said, has “sharply narrowed Rule 4.5—but just for funds and their advisors” by requiring “new tests that are so stringent that virtually every fund advisor will need to monitor its use of derivatives on a regular basis. Some will be subject to CFTC regulation atop their current SEC oversight—a redundant, costly regime that will harm their investors.” Others, he continued, “to avoid this regime, may choose to reduce their use of futures, options, and swaps—again, to the detriment of their investors. Either way, investors lose.”