ICI Submits Statement to Congress on CFTC Fiscal Year 2017 Appropriations Request

[29770]

March 15, 2016

TO: REGISTERED FUND CPO ADVISORY COMMITTEE
CLOSED-END INVESTMENT COMPANY MEMBERS No. 3-16
SEC RULES MEMBERS No. 10-16
SMALL FUNDS MEMBERS No. 7-16 RE: ICI SUBMITS STATEMENT TO CONGRESS ON CFTC FISCAL YEAR 2017 APPROPRIATIONS REQUEST

 

Yesterday, ICI filed a statement for the record (“Statement”) with the U.S. House of Representatives, Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies, Committee on Appropriations (“Committee”), in connection with the recent hearing held by the Committee to consider the appropriations request for the Commodity Futures Trading Commission (“CFTC”). [1]  The Statement, which is attached and is summarized briefly below, focuses on ICI’s concerns regarding the CFTC’s amendments to CFTC Rule 4.5, and ICI’s support of Section 319 of H.R. 2289, the Commodity End-User Relief Act, which passed the House on June 9, 2015.  Section 319 exempts many registered fund advisers from having to register with the CFTC as commodity pool operators (“CPOs”). [2]

The Statement questions the CFTC’s decision to modify Rule 4.5 as part of a 2012 rulemaking that was not mandated (or even contemplated) by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  It emphasizes the significant implications the Rule 4.5 amendments have had for many asset management firms, and that most of the costs imposed by this additional regulation are, or will be, indirectly borne by registered investment company (“registered fund”) shareholders.  The Statement explains that mutual funds and other types of registered funds are extensively regulated, and asserts that the CFTC made no effort to determine whether its own oversight would complement, conflict with, or merely duplicate, the SEC regime.  

The Statement explains that Section 319 of the Commodity End-User Relief Act addresses these concerns in a manner that is consistent with the CFTC’s stated intent in adopting the Rule 4.5 amendments.  Section 319 exempts registered fund advisers from having to register with the CFTC as CPOs if their registered funds invest in commodity interests limited to “financial commodities,” e.g., S&P 500 swaps and other securities-like derivatives, and do not invest in traditional commodities, such as natural resource and agricultural commodities. 

 

Sarah A. Bessin
Associate General Counsel

Attachment

endnotes

[1] The Committee hearing was held on February 10, 2016, but statements for the record were not due until after that date.  A webcast of the hearing is available at:  https://www.youtube.com/watch?v=vuqFzxAUiOM.

[2] See ICI Memorandum No. 29083 (June 10, 2015), available at http://stellent75.ici.org/intradoc/groups/final/documents/memo/29083.doc.pdf.