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House Passes Bill Curbing CFTC Authority Over Mutual Funds

The House of Representatives has passed a bill containing an amendment that would exempt investment companies registered with the SEC from duplicative registration with the CFTC.  If adopted by the Senate, this provision would essentially roll back the requirements of CFTC Rule 4.5 as they apply to registered investment companies, which requires most funds investing in commodity-related instruments to register with the CFTC.  The ICI and the Chamber of Commerce had challenged the rule after its adoption, but the District Court and the Court of Appeals ruled for the CFTC

In the floor debate, the sponsor of the amendment, Scott Garrett (R-NJ), who is Chair of the House Financial Services Committee, explained that it would eliminate “costly and duplicative registration requirements” for mutual funds regulated by the SEC.  He also noted that the CFTC would retain its enforcement authority over all investment instruments within its jurisdiction.  Collin Peterson (D-MN) opposed the amendment, saying “This is a situation where industry lost in court, and now, they are coming to Congress to try to accomplish what they couldn’t do through the court system . . .”

The amendment in question is attached to the CFTC reauthorization bill.  This bill is necessary because the CFTC receives funding for its operations only periodically from Congress.  The funding authority is established for a fixed period of time, and the current authorization expired on October 1, 2013.  (A lapse of funding authority has happened periodically in the past and has never resulted in the CFTC’s operations being halted.)

The CFTC reauthorization bill, containing the amendment exempting mutual funds from CFTC registration, passed the House by a 265-144 vote.  The bill as approved by the House also contained an amendment requiring the CFTC to conduct a cost-benefit analysis for its rules.  The White House has issued a statement strongly opposing passage of the bill in its current form, “because it undermines the efficient functioning of the Commodity Futures Trading Commission (CFTC) by imposing a number of organizational and procedural changes and offers no solution to address the persistent inadequacy of the agency’s funding.” 

Additional information on the House version of the CFTC reauthorization bill can be found here: