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Attacks on Dodd-Frank intensify

by Ira Teinowitz in Washington | Published April 18, 2012 at 1:33 PM

Two business groups on Tuesday expanded their attack on the costs of complying with new financial regulations, filing suit to challenge a rule because regulators failed to weigh its costs and benefits adequately.

The new suit was filed in U.S. District Court in Washington against the Commodity Futures Trading Commission by the U.S. Chamber of Commerce and the Investment Company Institute, but echoes a suit business groups filed and won in July against the Securities and Exchange Commission.

The earlier suit, filed by the Chamber and the Business Roundtable, resulted in an appeals court panel overturning the SEC's attempt to create proxy access rules for failure to justify its costs when weighed against its benefits.

The new suit, like the earlier one, is being handled by Eugene Scalia of Gibson, Dunn & Crutcher LLP.

A CFTC spokesman said the agency is reviewing the suit.

The new suit was filed on the same day a panel of the House Oversight and Government Reform Committee sharply questioned SEC Chairwoman Mary Schapiro about whether the SEC is doing enough to evaluate the costs of its new regulations with benefits.

Schapiro testified that the SEC is hiring additional economists and that she has directed agency officials to be more cognizant of examining and detailing the benefits and the costs in proposing new rules.

At the same time, she denied Republicans' suggestions that the agency had failed to assess costs.

"We have always done an economic analysis," she said. "I would not want it to be lost that this agency has done significant economic analyses."

She said her directive was intended to ensure that when describing benefits and costs, "we use a baseline that describes the current state of the world."

The latest suit challenges a CFTC rule requiring separate registration by investment companies and investment advisers as "commodity pool operators" if they handle commodities or swaps, even if they are already registered with the SEC as investment advisers. The plaintiffs argue that registration is an unnecessary duplication that imposes "unnecessary, contradictory, and burdensome regulations on advisers and their funds and ultimately, their shareholders" and that the agency has failed to demonstrate that the costs of complying outweigh the benefits.

"The CFTC failed to satisfy its statutory obligation to weigh the costs and benefits of this new regulation," Scalia said. "The agency imposed burdensome new requirements without showing that they are necessary, or even that they will be helpful to investors."

The suit asks the court to issue an injunction against the CFTC.

In December the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association sued the CFTC, arguing the agency failed to justify the costs of limits on 28 commodities it imposed under the Dodd-Frank Act.

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Tags: Chamber and the Business Roundtable | Commodity Futures Trading Commission | Investment Company Institute | Securities and Exchange Commission | U.S. Chamber of Commerce

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Attacks on Dodd-Frank intensify

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