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October 06, 2014

Dodd-Frank Rules on Risky Trades Could Ensnare Nonprofits

New government regulations designed to rein in risky trading by giant financial firms could inadvertently affect charities that manage money for other entities and engage, even indirectly, in certain types of investments, according to The Wall Street Journal.

A provision of the 2010 Dodd-Frank financial-reform law requires "commodity-pool operators" that invest in a range of derivatives contracts—such as futures, swaps, and options on commodities or foreign currencies—to register with the federal Commodity Futures Trading Commission.

Officials with major charities and big endowments tell the Journal the regulation could cover nonprofits that commingle funds for various entities into a single pool or use money managers who invest in derivatives, subjecting them to higher costs and more stringent record-keeping and reporting requirements.

The commission has yet to make any charities register under the Dodd-Frank rules. An agency spokesman said, "We don’t think this will affect large numbers of charities across the country."