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MFA Comments on Dodd-Frank Act


On September 22, 2010, the Managed Funds Association submitted initial comments to the Securities and Exchange Commission and the Commodity Futures Trading Commission on regulatory topics under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The MFA’s comments reflected concerns that the broad wording of the Dodd-Frank Act would result in certain provisions being inappropriately applied to private investment funds. To address these concerns, the MFA proposed that:

  • the SEC not create a self-regulatory organization to oversee investment advisers;
  • the SEC and the CFTC adopt guidance clarifying the criteria relevant to determining whether an investment adviser or a CTA that is registered with one of the agencies can rely on the relevant exemption from registration with the other agency;
  • strong confidentiality safeguards be put in place to protect proprietary information of private fund advisers provided to the SEC or CFTC;
  • appropriate implementation periods be provided to allow market participants time to adjust to any change in the definitions of “accredited investor” or “qualified client;”
  • the SEC define “accredited investor” to include “knowledgeable employees” of a private investment fund and amend Rule 3c-5 under the Investment Company Act of 1940 to expand the types of employees who can qualify as “knowledgeable employees” under that Rule;
  • the SEC and CFTC define “Security-Based Swap Dealer” (“SSD”) to exclude those market participants who are not in the business of buying and selling securities as well as those who buy and sell for their own account;
  • the SEC and CFTC exclude swap customers from SSD registration and regulation with respect to their cleared security-based swaps;
  • in setting capital requirements for non-bank Major Security-Based Swap Participants (“MSSPs”), the SEC and CFTC count collateral posted by such non-bank MSSPs towards any capital requirements;
  • position limits not be imposed on swaps;
  • the SEC not apply rules prohibiting incentive-based compensation to advisers of private investment funds;
  • the SEC retain the existing reporting periods under Section 13(d) and Section 16(a) of the Securities Exchange Act of 1934; and
  • the SEC not impose a new standard of conduct for investment advisers with retail customers.