The puzzlement of Dodd-Frank

Let's bow our heads and say a silent prayer for all the lawyers, in and out of Government, who must somehow make sense of the Dodd-Frank Act. As an author of the leading legal treatise on Derivatives Regulation, a soon-to-be four-volume tome that has survived for over 30 years, I face the same challenge.

Once upon a time, attorneys could read new legislation, comprehend its scope and effect, and render confident advice to clients. Not so with Dodd-Frank. The language is there for all to read, but it is nearly impossible to discern its meaning.

Between deferred effective dates and copious exemptions and "no-action" letters from the staff of the Commodity Futures Trading Commission (CFTC), what that paper says is often not what is intended. For the avoidance of further confusion, here are two simple examples.

Dodd-Frank took effect in the summer of 2010 and included a new provision that exemptions for retail foreign currency commodity pools do not apply unless each pool participant can separately qualify as an "eligible contract participant." But the CFTC deferred the effectiveness of that restriction for many months, something that would escape the attention of all but the most rabid of Federal Register readers.

Dodd-Frank also extended the reach of the CFTC over many offshore derivatives operations. When foreign regulators objected, the agency again deferred a jurisdictional decision to an uncertain future date.

This is not criticism of the CFTC, whose staff has the unenviable task of implementing Dodd-Frank by all practical means. Their task is herculean. But what are we to make of "law" that looks done but is not? There should be trauma clinics for all lawyers, public and private, in the name of humanity. Eventually, I expect the national health community to recognize this disability.

Lawyers don't like to say that laws "may" apply to their clients, and clients won't pay for such waffling anyway. So, to all the readers who chose to pursue a different profession, count yourselves lucky.

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