MFA Urges Congress To Strengthen Laws Against Market Manipulation

by Glen Shapiro, LawAndTax-News.com, New York

21 July 2008

As part of its comprehensive plan to address concerns with volatility in the commodities markets, the US Managed Funds Association (MFA) has released a report which urges Congress to strengthen the regulatory regime by giving the Commodities and Futures Trading Commission (CFTC) more weapons to combat market manipulation.

The MFA announced last week that its 'Analysis and Recommendations: The Investor in a Sound Futures Market,' sets forth a series of recommendations designed to ensure economic growth and stability.

“With this Analysis, we are asking Congress to take immediate action to end the abusive practices of manipulators and give the CFTC the funds it needs to expand its oversight of the futures markets,” commented Richard H. Baker, MFA President and Chief Executive Officer.

The MFA was formed in 1991 as a global trade association for the alternative investment industry. MFA members represent the vast majority of the largest hedge fund groups in the world who manage a substantial portion of the approximately USD2tn invested in absolute return strategies.

In the Analysis, the MFA stresses the invaluable role that investors play in the futures markets by absorbing risk from commercial markets participants, supplying much needed capital, reducing volatility and contributing to the price discovery process.

“It’s critical that policy makers recognize the role that investors play in providing market liquidity and not unintentionally punish responsible market participants. Maintaining confidence in the futures markets requires that Congress not overreact and potentially do more harm than good,” added Baker.

MFA’s Analysis calls for additional measures to address market manipulation:

• Congress appropriating funds to increase CFTC oversight, improve its information technology and data gathering capacity and hire more enforcement and surveillance staff.
• Congressional requirement that the CFTC obtain all necessary market intelligence, through the CFTC’s special call authority, in an effort to prevent market manipulation and report back to Congress before 15th September, 2008.
• The President should direct the President’s Working Group to undertake a comprehensive review of the factors affecting commodity prices and the adequacy of our regulatory tools to combat manipulation and abusive market practices. That review should also include an assessment of current legislative proposals on US futures markets.

The MFA said that it has a long history of taking proactive steps to maintain and enhance principles and values of the alternative investment industry. In November 2007, the association released its fourth version of Sound Practices for Hedge Fund Managers, the seminal resource for hedge fund managers seeking to foster a culture of compliance.

The MFA’s Sound Practices were updated and revised last year in response to President’s Working Group on Financial Markets’ (PWG) call for the hedge fund industry to establish standards of excellence for improved market discipline and enhanced vigilance through collaborative efforts among counterparties.

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