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Mutual Fund Directors' Legal Brief Decries CFTC Swaps Rule

Joe Mont | May 29, 2012

On May 29, the Mutual Fund Directors Forum filed a "friend of the court" brief in a lawsuit brought by the Investment Company Institute and the U.S. Chamber of Commerce, which seeks to overturn a recently adopted U.S. Commodity Futures Trading Commission rule that will require many mutual funds using futures, swaps, and options to register with it.

The Mutual Fund Directors Forum is an independent, non-profit membership organization for investment company independent directors.

The amicus curiae brief was filed by the organization “to assist the court in understanding how the rulemaking at issue will impact the tens of millions of Americans who invest their savings in mutual funds.”

It argues that the CFTC, in adopting the rule, did not consider the “increased costs to shareholders of new dual registration with the CFTC, which will confer no regulatory benefits on mutual fund investors.” The brief also emphasizes that fund shareholders “are already protected by the SEC's comprehensive regulatory scheme" and there is "no evidence that dual registration enhances that protection.”

Investors will be harmed by creating “a disincentive for funds to use investments in futures, options, and swaps for hedging and other investment-related purposes, because to do so will subject the fund to additional regulation,” the organization claims.