The regulator is planning a review to examine whether any additional protections are necessary for funds operating under the Investment Company Act. The SEC will defer considering all exemptions to the act until the review has been completed.

The review will examine whether funds that rely substantially on derivatives are maintaining adequate risk management controls, and whether funds’ use of derivatives is in keeping with the leverage, concentration and diversification specifications of the act.

“It’s appropriate to engage in a more thorough review of the use of derivatives by ETFs and mutual funds, given the questions surrounding the risks associated with the derivative instruments underlying many funds,” said SEC chairman Mary Schapiro.

“Although the use of derivatives by funds is not a new phenomenon, we want to be sure our regulatory protections keep up with the increasing complexity of these instruments and how they are used by fund managers,” said Andrew Donohue, director of the SEC’s division of investment management.

“This is the right time to take a step back and rethink those protections.”