Back to Court: CFTC Challenged on Investment Fund Registration

The U.S. Commodity Futures Trading Commission, or CFTC, went back to court on Friday to face-off against industry lobbies in a battle over investment fund registration. The new hearing comes one week after the CFTC lost round one in a bought over position limits.

The prospects for a pro-industry ruling, however, are far from certain. When Eugene Scalia, an attorney for the industry groups, said that the registration requirements would cost mutual funds and their investors, U.S. Judge Beryl Howell retorted: “How significant can those costs be fore mere regulation?”

The arguments often turn on two points:

1. Whether new regulatory rules are necessary for healthy market activity.

2. Whether the rules are economically viable.

Additionally, the CFTC is expected to ensure that it doesn’t overstep its jurisdiction with new regulatory rules, something that the industry lobby, including the Investment Company Institute and the U.S. Chamber of Commerce, claim the regulatory agency has repeatedly failed to do.

Judge Howell did shine some light on the CFTC’s case, however, when she suggested that she was unsympathetic to the argument leveraged by lobby groups against the CFTC in its failed court case last week. “The fact that had the financial crisis,” Howell said, showed that existing enforcement alone “didn’t work.” She explained that Congress passed Dodd-Frank in order to “increase enforcement agency oversight of this kind of trading market.”

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