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Comments to the SEC on Derivative Regulation

Regulatory Comments and Testimony

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Comments to the SEC on Derivative Regulation

Full Document Available in PDF

The SEC proposes this rule “to take an updated and more comprehensive approach to the regulation of funds’ use of derivatives.” However, the SEC’s cost-benefit analysis is flawed in that it focuses on the supposed benefits of limiting exposure to derivatives to investors in funds and business development companies while ignoring the costs of doing so. In addition, the rule would effectively make certain types of exchange-traded funds unavailable to retail investors, leaving these individuals exposed to greater risk of market volatility in boom-and-bust cycles and “black swan” economic shocks. Most importantly, the agency appears to ignore the limits placed on its authority to regulate derivatives and futures by the Commodity Futures Modernization Act of 2000.