A Securities and Exchange Commission proposal to place caps on registered investment firms’ exposures to derivatives is shaping up to be a contentious fight as industry representatives and advocacy groups’ are squaring off in a lobbying battle, MorningConsult.com reported yesterday. Although the SEC hasn’t announced its plans, lobbyists who have been watching the derivatives rule expect the agency to move forward in the coming months. Watchdog groups like Better Markets and Americans for Financial Reform have championed the proposal, but it has come under fire from the financial industry, which says it could harm the manner in which funds safely manage assets. The proposal has been the subject of public discussions since formal stakeholder comments came out in March, and it has continued to be scrutinized by lawmakers such as Sen. Sherrod Brown (D-Ohio), who weighed in on the debate last month. The SEC’s proposal would limit the derivatives exposures of mutual funds and exchange-traded funds to 150 percent of their total net assets. Funds would also have the option of a 300 percent ratio if they meet the criteria of a risk test.
