NFA and Better Markets File Amicus Curiae in ICI v. CFTC
Commentary by Bob Zwirb and Steven Lofchie
The NFA, the futures industry SRO, and Better Markets, Inc., "a non-profit organization," have filed a joint amicus curiae brief in the Investment Company Institute v. CFTC matter. The brief urges the U.S. Court of Appeals for the D.C. Circuit to uphold the CFTC's amendments toRule 4.5. The CFTC rule amendments at issue seek to re-impose de minimis trading and no-marketing restrictions upon SEC-registered investment companies ("RICs") seeking to trade in futures and swaps without becoming "commodity pools" regulated by the CFTC (in addition to their regulation by the SEC). The brief seeks to "explain" to the Court the harm that would occur if the rule amendment were invalidated or if the court were to impose upon the CFTC a strict burden for fulfilling its obligation, under CEA Section 15, to consider the rule amendment's costs and benefits. The brief argues that the evidence demonstrates the CFTC was appropriately guided by a full appreciation of the need for reform and the role that the rule amendments would play in achieving the congressional objective of preventing another financial crisis.
See: Amicus Brief in Support of Appellee - ICI v. CFTC [U.S. Court of Appeals for the D.C. Circuit, 12-5413].
See also: Order - ICI v. CFTC [U.S. Court of Appeals for the D.C. Circuit, 12-5413].
Related News: "ICI vs. CFTC, Brief of Appellee CFTC; Joint Motion of NFA and Better Markets for Leave to File Joint Amicus Curiae Brief (with Zwirb Comment)" (March 11, 2013); "ICI vs. CFTC: Implementation of Amendments to Rule 4.5, Too Soon? (with Zwirb Comment)" (March 7, 2013); "ICI vs. CFTC - Industry and Former Senior Regulators' Amicus Brief Support ICI (with Zwirb Comment)" (February 7, 2013) and "ICI vs. CFTC (with Zwirb Comment)" (February 1, 2013).
Commentary
The interesting aspects of the brief involve the policy arguments offered by the NFA and Better Markets. For its part, the NFA argues that the amendments are necessary due to changes in the investment environment arising from the financial crisis of 2007-08: "Times have drastically changed since 2003. The unprecedented crisis in the financial markets in 2007-08 ushered in a new era." Better Markets, on the other hand, is focused on the cost/benefit requirement, asserting that Congress did not intend to burden the CFTC with "costly, time consuming, and ultimately counter-productive duty to conduct cost-benefit analysis for each of its rules." Indeed, Better Markets asserts that one way in which Better Markets itself furthers its mission is by "defending rules promulgated by the financial regulators against interested parties seeking to overwhelm those agencies with a burdensome and unwarranted economic analysis obligation, typically labeled 'cost-benefit analysis,' that has no legal basis."
It remains to be seen whether these arguments and Better Market's straightforward attempt to eliminate the CEA's cost/benefit obligation will succeed in this forum, especially with a court noted for its insistence that regulatory agencies engaged in rulemaking fulfill such obligation in an economically rigorous manner.