Regulatory musical chairs

Futures, Jun 2005 by Collins, Daniel P

"When we are talking about duplicative regulation, one of the biggest problems is that public funds are not only reviewed by the NFA for the CFTC, but also by the SEC. And the SEC is not just looking at things that would normally be securities issues but also to the substance of commodity exposure," Crapple says. "We also have state bluesky commissions trying to make substantive comments on futures [programs]."

Yet, all the while there is a regulator that has specialized in futures related disclosure, he says.

Crapple would like the SEC and the states to defer to the NFA in the examination of disclosure documents.

The SEC has a tendency to rotate examiners, says Crapple, which results in a public pool constantly having to deal with neophytes. "The upshot is that the examiner you typically get to file a registration statement has never seen one before and will come up with 20 pages of comments on a prospectus that has already cleared the SEC. It just seems like an inefficient use of government resources," he said.

Because public pool are securities the SEC will continue to play a role but Crapple and others believe each regulator should stick to their specialty.

"They should be looking at aspects vis-à-vis the securities being issued, not the things that are esoteric to the futures industry which should be left to the NFA," Crapple said.

Mark Rosenberg, chairman and CEO of Ssaris Advisors LLC, wanted to see all absolute return strategies more available to retail.

"Managed futures has been offered for years through the CFTC and offered for years to the retail client," he says. "That should be simplified and offered on the same basis as a mutual fund."

Rosenberg understands that any retail offering will involve greater regulation but doesn't think futures should face a double whammy. "Futures are a tool like any other investment tool. The regulators should get together and say who is regulating it and what are the standards," he noted at the roundtable.

While public commodity pools seem to have been lost in shuffle, perhaps if the CFTC and SEC can work out a strategy where each regulator sticks to its core competency, then public pools could be offered under proper, but not overly burdensome, regulation and retail could have greater access to absolute return strategies.