Investment Management
CFTC Authority Extended over Retail Forex and Energy Trading
What This Means
Recently, Congress enacted amendments to the Commodity Exchange Act (CEA) that grant the Commodity Futures Trading Commission (CFTC) extended authority to regulate over-the-counter foreign exchange (forex) trading with retail customers and trading in energy derivatives conducted over the counter and through electronic platforms. As a result of the new CEA provisions, certain futures market participants will have to register their retail forex business with the CFTC. Additionally, futures commission merchants (FCMs) and futures-introducing brokers involved in retail forex and energy trading will want to consider making changes to their compliance procedures and processes. The new provisions of the CEA are scheduled to become effective September 19, 2008. >>> continued
Seventh Circuit “Disapproves” of Gartenberg Factors
PDF version The Seventh Circuit Court of Appeals recently cast some uncertainty over the long-standing factors that fund directors use to determine the proper level of an adviser’s fees as set forth in Gartenberg v. Merrill Lynch. The court affirmed the lower court’s dismissal of a complaint against Harris Associates, the adviser to the Oakmark family of mutual funds. In support of a claim under Section 36(b) of the Investment Company Act of 1940, the plaintiffs argued that, because the funds paid a higher fee than the adviser’s institutional accounts for allegedly similar services, the funds’ fees could not have been the result of arm’s-length bargaining. While the Seventh Circuit agreed with the lower court’s dismissal of this claim, it is unclear how this decision will affect the treatment of Gartenberg by other courts. >>> continued
SEC Proposes Amendments to Regulation S-P
The Securities and Exchange Commission (SEC) has proposed amendments to Regulation S-P, which sets forth privacy obligations for entities it regulates. To help prevent and address security breaches and better protect investor information, the SEC proposes to amend Regulation S-P in four principal ways. First, the proposed amendments would require more specific standards under the safeguards rule, including standards that would apply to data security-breach incidents. Second, they would amend the scope of the information covered by the safeguards and the disposal rules, and broaden the types of institutions and persons covered by the rules. Third, the proposed amendments would require institutions subject to the safeguards and the disposal rules to maintain written records of their policies and procedures and their compliance with those policies and procedures. Finally, the amendments provide a new exception from Regulation S-P’s notice and opt-out requirements to allow investors to more easily follow a representative who moves from one brokerage or advisory firm to another.