Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The United States Court of Appeals for the District of Columbia Circuit yesterday upheld the Commodity Futures Trading Commission’s (CFTC) final rule on the criteria that registered investment companies (RICs) must meet to be excluded from Commodity Pool Operator (CPO) status. Investment Company Institute, et. al., v. Commodity Futures Trading Commission, Case No. 12-5413, June 25, 2013.

Following the passage of the Dodd-Frank Act, the National Futures Association (NFA) petitioned the CFTC to reinstate the criteria—used prior to 2003—to determine whether RICs were excluded from CPO status (at the time of the NFA petition, RICs had been “effectively excluded from the CPO definitions and most CFTC CPO requirements” since 2003. Slip. op. at 4.)

Following a notice and comment rulemaking, the CFTC agreed (and added swaps to the trading thresholds and additional reporting requirements).

The Investment Company Institute and the Chamber of Commerce challenged the rules in the District Court under the Administrative Procedure and Commodity Exchange Acts. The District Court summarily dismissed those challenges and yesterday the Court of Appeals agreed. The court said that the CFTC adequately explained why it had changed from excluding RICs from CPO definitions and most CPO requirements under its post-2003 regulation and returned to the more stringent pre-2003 regulation. In addition, the court rejected a variety of other challenges to the rules.