Case Updates
Outcome
June 25, 2013
The D.C. Circuit affirmed the decision of the district court.
Previously, the District Court for the District of Columbia denied the Chamber's Motion for Summary Judgment and granted the CFTC's Motion to Dismiss in part and granted the CFTC's Cross-Motion for Summary Judgment. That court held the CFTC fulfilled its obligation to consider the costs and benefits of its proposed rule, that it acted within its discretion and that its actions were not arbitrary or capricious.
U.S. Chamber, ICI appeal D.C. District Court decision upholding CFTC Rule 4.5
December 27, 2012
The U.S. Chamber of Commerce and the Investment Company Institute filed a notice of appeal to a D.C. District Court ruling rejecting the group's legal challenge to the U.S. Commodity Futures Trading Commission’s (CFTC) final rule imposing redundant regulations on registered investment companies – such as mutual funds and exchange traded funds (ETFs) – without satisfying the agency’s obligation to weigh the costs or benefits of the rule.
The lawsuit challenged the CFTC's recent changes to its Rule 4.5, which governs the regulation of commodity pool operators (CPO). The CFTC’s changes to Rule 4.5 will require many advisers to mutual funds and ETFs - which are already regulated by the SEC - to be dually regulated by the the CFTC as CPOs. Rule 4.5 imposes unnecessary, contradictory, and burdensome regulations on advisers and their funds and, ultimately, their shareholders.
The suit charged that Rule 4.5 is arbitrary and capricious, and that the CFTC violated the Administrative Procedure Act (APA) as well as the Commodity Exchange Act (CEA). In finalizing its rule, the CFTC failed to:
- Perform the most basic elements of a proper cost benefit analysis, even though the CEA explicitly requires one;
- Explain its reversal of its 2003 decision that CFTC regulation of mutual funds and ETFs was unnecessary, burdensome and would impair liquidity;
- Articulate any discernable benefits from the rule above and beyond those already provided to investors through existing regulation;
- Provide rational—much less adequate—justifications for the changes to Rule 4.5 as well as the added regulatory requirements and restrictions faced by funds that can no longer rely on the rule.
These grounds are similar to successful challenges to agency regulations in other cases, including: American Equity Life Insurance Company v. SEC on the SEC's failure to evaluate the effectiveness of the existing regulatory regime; and Business Roundtable and Chamber of Commerce v. SEC and Chamber of Commerce v. SEC on the SEC's failure to properly consider the economic consequences of two separate rules.
The suit asked the court to block the CFTC from implementing the 2011 changes to Rule 4.5.
Complaint filed 4/17/12. Motion for summary judgment filed 5/18/12. Amicus brief of Mutual Fund Directors Forum in support of plaintiffs filed 5/29/12. DC District Court decision 12/12/12. Notice of appeal to DC Circuit filed 12/27/12. Appellant brief filed 1/30/13. Oral argument 5/6/13. Decided 6/25/2013.
Case Documents
- Complaint -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Plaintiffs ICI and Chamber's Motion for Summary Judgment -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Amicus Brief of Mutual Fund Directors Forum in Support of ICI and Chamber -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Defendant CFTC Opposition to Summary Judgment, Cross-Motion for Summary Judgment, and Motion to Dismiss -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Plaintiffs ICI and Chamber's Response to CFTC's Cross-MSJ and MTD -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Defendant CFTC Reply to Plaintiffs' Response to CFTC Cross-MSJ and MTD -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Amicus Brief of National Futures Ass'n in Support of CFTC -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Amicus Brief of Better Markets, Inc. in Support of CFTC -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Response to Supplemental Submission - ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- CFTC Agency Motion to File Reply -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- CFTC Reply to Supplemental Response -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- CFTC Proposed Order -- ICI and Chamber v. CFTC (D.C. Dist. Court).pdf
- Memorandum Opinion -- ICI v. CFTC (D.C. District Court).pdf
- Notice of Appeal to DC Circuit -- ICI and Chamber v. CFTC (DC Circuit).pdf
- Amended Order -- ICI and Chamber of Commerce v. CFTC (D.C. District Court).pdf
- Motion to Expedite -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- Order granting motion to expedite -- ICI v. CFTC (D.C. Circuit).pdf
- Statement of Issues -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- Mutual Fund Directors Forum et al. amicus brief in support of appellants -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- ICI and Chamber of Commerce v. CFTC - motion scheduling oral argument.pdf
- NFA and Better Markets Notice of Intention -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- NFA and Better Markets Motion for Leave -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- CFTC Brief -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- Opposition to Amicus Motion -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- Reply Brief for Appellants -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- National Futures Assoc. and Better Markets, Inc. amicus brief in support of appellees -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- Appellants Brief -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- Order allocating time for oral argument -- ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf
- 28(j) Letter to Clerk of Court -- ICI and Chamber of Commerce v. CFTC (D.C Circuit).pdf
- CFTC Response to 28(j) Letter -- ICI and Chamber of Commerce v. CFTC (D.C Circuit).pdf
- Decision - ICI and Chamber of Commerce v. CFTC (D.C. Circuit).pdf