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CFTC Defeats Challenge to Mutual Fund Commodities Rule

"The U.S. Commodity Futures Trading Commission defeated a federal court challenge to a rule requiring mutual funds with commodities investments to register with the agency.

U.S. District Judge Beryl Howell in Washington today rejected arguments by the U.S. Chamber of Commerce and the Investment Company Institute that the rule is unnecessary, and that the commission didn’t properly assess the costs and benefits when it approved the regulation in February.

“The court is satisfied that the CFTC considered the relevant factors, acted well within its discretion, and that there was nothing arbitrary or capricious about the CFTC’s actions in promulgating the final rule,” Howell wrote in a 93- page ruling dismissing the lawsuit."

The case is one of several brought by the financial industry as it pushes back against tighter regulations passed in the wake of the 2008 credit crisis. CFTC commissioners, who approved the registration requirement in a 4-1 vote, said it would increase investor protections and eliminate a decade-old loophole that let funds investing in futures and swaps tied to commodities evade their oversight."

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"Mutual funds use commodity futures and other derivatives to hedge risk, for portfolio diversification or as part of a strategy for seeking higher returns, he said.

Dennis Kelleher, president and chief executive officer of Better Markets, an organization advocating stricter financial regulation, said in a statement the decision is “a total victory not just for the CFTC, but also for financial reform.”

“This is also a victory for taxpayers as well who are still paying the price for the financial collapse caused largely by unregulated reckless trading and investments,” he said.

The case is Investment Company Institute v. U.S. Commodity Futures Trading Commission, 1:12-cv-00612, U.S. District Court, District of Columbia (Washington)."

Read full Bloomberg article here

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