Insurance fund proposed by futures regulator

Insurance Fund

Insurance Fund

Government agency suggests insurance fund for the sake of consumers

The Commodity Futures Trading Commission, an independent agency of the U.S. government that regulates the futures and options markets, has proposed the introduction of an insurance fund as a way to protect consumers. The proposition comes in the wake of the collapse of brokerages MF Global and Peregrine Financial Group, which has lost more than $1.8 billion of the funds that were provided to them by consumers. The plan, which is being lauded by agency Commissioner Bart Chilton, is expected to provide consumers with a degree of financial protection from the collapse of brokerage firms they may be doing business with.

Congressional approval of the insurance fund unlikely this year

The introduction of an insurance fund would require congressional approval. Though the concept of an insurance fund has garnered the support of some federal legislators, it is unlikely for such a measure to receive the approval it needs during an election year. The upcoming elections have sidetracked the focus of many legislators as they scramble to support their favored presidential candidate. Inaction on the issue may keep consumers at risk, however, a possibility that has the Commodity Futures Trading Commission eager to promote an insurance fund.

Collapse of brokerages puts consumers at financial risk

The collapse of the brokerage firms has caused federal regulators to take a hard look at the self-regulatory model that has been in place in the futures market for several years. Self-regulation agencies, which assist the federal government in overseeing the markets, have come under fire for their apparent inaction concerning the actions the brokerage firms have taken. The collapse of these firms could lead to serious changes in the regulatory model and lead to the advent of more insurance protection therein.

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Insurance fund to provide consumers with $250,000 in protection

Opponents of the insurance fund proposal argue that it would not provide consumers with meaningful protection or payback in the event of another collapse. If it were passed in its current form, the insurance fund would provide U.S. consumers with $250,000 in insurance protection against the collapse of brokerage firms.

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