Pending implementation of new rules written under the ‘‘Dodd-Frank Wall Street Reform and Consumer Protection Act” of 2010 has caused some concern among sellers of gold, silver, platinum, palladium and other precious metals that are regulated by the Commodity Futures Trading Commission and offer deferred delivery to purchasers.
Forex.com reported on line that “As a result of the Dodd-Frank Act enacted by U.S. Congress, a new regulation prohibiting U.S. residents from trading over the counter precious metals, including gold and silver, will go into effect on Friday, July 15, 2011.”
The report is not exactly accurate when it comes to gold, silver or platinum purchases in small or non-regulated sizes (such as 1 ounce bars, U.S. Mint bullion coins in any quantity, or any contract that is not approved by the Commodity Futures Trading Commission), and just plain wrong if the metals (or coins containing them) do not have their delivery deferred.
Deferred delivery generally means that the coins (or metal) is not delivered to a buyer within 28 days; or as Section 742 of the Dodd-Frank law provides, exempted is any “contract of sale that –
‘‘(aa) results in actual delivery within 28 days or such other longer period as the Commission may determine by rule or regulation based upon the typical commercial practice in cash or spot markets.”
As to the amount of precious metal that can be regulated by the CFTC, the general rule is that only bulk silver and gold coins under a standard contract are covered. In Title 7 of the U.S. Code, section 23(b), it appears that this includes not higher or lower quantities. This is further ratified in, for example, the Chicago Board of Trade Rules, ¶1404.01 (indicating minimum units of multiples thereof).
So coin shops, most dealers and nearly all collectors simply aren’t affected – nor were they intended to be. The CFTC, after all, regulates “Futures Trading,” and so long as there is reasonably prompt delivery, consumers appear to be protected. There may be regulation if delivery is deferred.
The Industry Council for Tangible Assets was on this issue over a year ago – back when the CFTC was saying that if delivery took place later than “2 days” after a sale, it could be regulated. Even Forex.com gives ICTA credit, along with other coin collecting groups, for persuading Congress to make it 28 days.