Bloomberg writes "CFTC Proposes Restrictions on Brokers' Use of Funds". It says, "The Commodity Futures Trading Commission moved to restrict what brokers can do with clients' assets after investments in money-market mutual funds and government-sponsored entities soured during the financial crisis. CFTC commissioners voted 4-1 today to propose limiting investments in money-market funds to 10 percent of client assets and investments in GSE securities to 50 percent. The rule would stiffen restrictions on what brokers can do with customer money, or margin, used to back futures contracts. Regulators are questioning the safety of money-market funds after the September 2008 failure of the $62.5 billion Reserve Primary Fund caused a run on the industry, exacerbating the global credit freeze. GSE securities have also faced new scrutiny after the U.S. government seized Fannie Mae and Freddie Mac two years ago amid losses that pushed the mortgage-finance companies to the brink of collapse. So-called futures commission merchants now face no restrictions on how much client money they can invest in money-market funds and GSEs. The CFTC also proposed capping investments in municipal bonds, certificates of deposit, commercial paper and corporate bonds. Republican CFTC Commissioner Scott O'Malia voted against the proposal, calling it overly 'prescriptive.'" See also "Opening Statement, Third Series Of Proposed Rulemakings Under The Dodd-Frank Act, CFTC Commissioner Scott O'Malia," which says, "I am quite concerned that the proposed rules are overly prescriptive, especially given that the Commission released an Advance Notice of Public Rulemaking on this very issue in May of 2009. My main concern with this proposal is that the Commission is proposing to significantly revise the scope and character of the types of permitted investments of customer funds in the face of numerous public comments to the contrary. In fact, the concentration limits in today's proposed rule seem to suggest that the 2,000 plus pages of the Dodd-Frank Act have done nothing to improve the safety and liquidity of money-market mutual fund investments. I strongly urge the public to comment on the reasonableness of the asset-based concentration limits, especially the 10% limit on money-market mutual funds."
