Firms caught in the crosshairs of regulations are faced with a Solomon-like decision: to comply or not to comply.

The decision has the hallmarks of a no-win situation, where firms are damned if they do and damned if they don’t.

“Regulators and financial institutions continue to play some games with each other,” Brian Sentance, chief executive of Xenomorph, an analytics and data provider, told Markets Media.

“For instance, if the regulations have been made deliberately vague by the regulator, then is it more cost effective for an institution to spend money to comply, only to be told that what you have done is not sufficient?” said Sentance. “Or maybe you should just sit back, wait until you are fined and then implement whatever the regulator then has to tell you to do.”

A case in point is a proposal by the Commodity Futures Trading Commission that seeks to “harmonize” certain aspects of its regulatory regime with existing requirements applicable to registered investment companies.

The proposal is occasioned by the CFTC’s recent amendments to Rule 4.5 under the Commodity Exchange Act which would require investment advisers to certain funds to register with the CFTC as commodity pool operators.

The proposal would impose substantial and unnecessary regulatory burden on such funds and advisers, in addition to the burdens they already face as a result of the new registration requirements, the Investment Company Institute (ICI) said in a comment letter.

“To call it ‘harmonization’ is a gross mischaracterization,” the ICI, a national association of U.S. investment companies, said. “To the contrary, the proposal would do great harm to fund investors by essentially nullifying the SEC’s efforts over the past 30 years to make fund disclosure clear, concise and therefore more useful to investors.”

Implicit in the proposal to harmonize is a recognition that funds and their advisers already operate under another regulatory framework.

“Beyond that, however, the proposal demonstrates “a complete lack of appreciation for, or analysis of, that framework and its implications for the Commission’s pursuit of its staged goals,” the ICI said.