* Chamber, ICI challenge CFTC registration rule
* Ruling not expected imminently
By Aruna Viswanatha
WASHINGTON, Oct 5 The U.S. commodity regulator
went to court on Friday to try to fend off an industry challenge
to its rule requiring that certain investment funds register
with the agency.
The hearing came just one week after the regulator saw
another one of its rules tossed out.
U.S. District Judge Beryl Howell gave little indication
which way she might rule, but had tough questions for both
sides, the Investment Company Institute and the U.S. Chamber of
Commerce on one side, and the Commodity Futures Trading
Commission on the other.
When a lawyer for the industry groups, Eugene Scalia,
suggested the new registration requirements would impose
enormous costs on mutual funds and their investors, Howell
asked: "how significant can those costs be for mere
The groups have said the CFTC did not adequately weigh the
costs of the rule against its benefits, as it is required to do,
and did not assess whether it would overlap with existing
regulation from the U.S. Securities and Exchange Commission.
Industry complaints about flawed economic analyses have been
used to successfully strike down a handful of SEC reforms in
This challenge against the CFTC's fund rule is the second
legal complaint against that agency.
The first challenge was decided last Friday, when a judge
from the same court ruled that the CFTC's "position limits"
rule, included in the 2010 Dodd-Frank financial reform law,
should be vacated.
Judge Robert Wilkins said that Dodd-Frank did not give the
agency a "clear and unambiguous mandate" to set these trading
curbs without showing they were necessary.
The rule debated on Friday would require advisers to mutual
funds and exchange-traded funds to register in certain cases
with the CFTC, such as if the funds' non-hedging commodity
trades - including futures, swaps and options - exceed certain
The rule was not mandated by Dodd-Frank, but the CFTC has
argued the 2007-2009 crisis and other provisions in Dodd-Frank
justifies the need for greater oversight of funds that use
Howell appeared sympathetic to that argument. "The fact that
we had the financial crisis" shows the existing enforcement
regime "didn't work," she said. Congress passed Dodd-Frank in
part "to increase enforcement agency oversight of this kind of
trading market," she said.
Several details of the rule are still in doubt, because they
rely on definitions to be provided in other rules that have not
been finalized, an idea Howell pressed the CFTC on.
"With three moving parts of critical aspects of the rule,
how could the Commission do as complete" an analysis as the law
requires? she asked CFTC lawyer Jonathan Marcus.
A ruling is not expected immediately because both parties
have to submit additional briefs to the court.