The SEC and the Commodity Futures Trading Commission on Friday announced they will study whether contracts for stable value funds fall under the definition of a swap.
The joint study was ordered by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which also stipulates that the two agencies consult with the Labor and Treasury departments and state regulators as they conduct their study to determine “if the regulatory regime for (stable value contracts) should be limited or tailored in any way,” according to an SEC news release.
The practical purpose for the study is to make sure that stable market contracts don't get caught up in that same regulatory net as riskier swaps, Gina Mitchell, president of the Stable Value Investment Association, said in an interview. SVIA members include public and private plan sponsors, insurance companies, banks and investment managers. “SVCs are so important that legislators wanted to make sure they didn't get swept up” in the financial regulatory overhaul.
Since stable market contracts typically are issued by banks or insurers, they are overseen by state regulators and subject to ERISA protections, Ms. Mitchell said.
“The existing regulatory structure is sufficient,” Ms. Mitchell said. “We hope they come to appreciate that this is one (product) that has performed in a variety of market cycles incredibly well.”