CFTC's rule on commodity pool operators upheld by U.S. District Court

On Wednesday, December 12, 2011, the U.S. District Court for the District of Columbia rejected a challenge to the CFTC's new rule governing Commodity Pool Operators.  The rule was challenged by the Investment Company Institute and the U.S. Chamber of Commerce, primarily on procedural grounds related to the adequacy of the agency's consideration of the costs and benefits of the new rule, which is required by section 15(a) of the Commodity Exchange Act (CEA). 

 Judge Beryl A. Howell's comprehensive 92-page opinion, available on the court's website, serves as a virtual blueprint for how agencies should conduct analyses of the costs and benefits of regulations, particularly when the regulations cover areas in which the costs and benefits cannot be reasonably quantified.  Numerous regulations implementing the Dodd-Frank Act remain to be finalized and modifications to many of them can be expected as the industry evolves and experience with the new regulations accumulates.  Judge Howell's opinion will greatly facilitate this daunting task.  And, although the opinion addresses the specific requirements of section 15(a) of the CEA, the analysis illuminates the correct general approach for dealing with costs and benefits that cannot be quantified and should serve as a landmark in administrative law far beyond regulations under the CEA.