WASHINGTON (AP) -- Federal regulators are moving toward imposing restrictions on the use of derivatives by mutual funds, aiming to protect investors in funds that rely on the high-risk transactions.
Members of the Securities and Exchange Commission voted 3-1 at a public meeting Friday to propose the limits on derivatives use by mutual funds as well as exchange-traded funds. ETFs, which have been growing in popularity, track a market index or basket of stocks and trade through the day.
The proposal goes out for public comment for 90 days, and it could be formally adopted by the SEC sometime after that.
Derivatives are investment tools whose value stems from an underlying investment such as oil, stocks or interest rates. They were a central factor behind the financial crisis that erupted in 2008.