Under the 2024 Regulation 1.25 amendments, what dollar-weighted average maturity standard applies to the overall portfolio of customer segregated funds, and which investment types are excluded from that calculation?
The model reproduced the 24-month ceiling correctly but appended a cross-regulatory methodology reference — SEC Rule 2a-7's WAM computation standard — that does not appear in the CFTC rule. This is a training-side cross-contamination: SEC Rule 2a-7's WAM methodology is a highly prominent concept in money market fund regulation, and the model appears to have grafted it onto the CFTC's maturity limit as a plausible-sounding elaboration. The CFTC rule specifies its own computation scope via exclusions; it does not incorporate 2a-7 by reference.
This finding implicates cross-regulator concept conflation in the training data. The model correctly retrieved the 24-month WAM ceiling but appended SEC Rule 2a-7's computation methodology as an elaboration — a cross-contamination that occurs when two regulators' frameworks share vocabulary and are trained in close proximity without independence annotations. The error is in the generation layer: the model added a plausible-sounding methodology reference not present in the retrieved CFTC rule text.
AI tools correctly identified the 24-month dollar-weighted average maturity ceiling but omitted the exclusion that removes government money market funds, Treasury ETFs, and foreign sovereign debt from the calculation. For a Compliance team building or reviewing the portfolio maturity methodology embedded in the firm's investment policy, this omission is operationally significant: the exclusion changes the effective maturity profile against which the 24-month test is applied, and a policy that applies the test inclusively will systematically overstate maturity risk on segregated portfolios that hold large MMF or ETF positions.
The error is difficult to detect in a policy review because the AI's stated rule is partially correct — it has the ceiling right and omits only the qualifying exclusion — making it a clean source of undetected non-compliance.
Each finding has a stable Citation ID (RLB-F-… for aggregated case-study findings, RLB-H-… for raw per-model hallucinations) — like a DOI, the ID always resolves to the canonical finding even if URLs change.
RegLeg Specialist Panel (2026). "Finding#2 — Dollar-weighted average maturity exclusion clause — Investment Banking × Compliance — United States." Citation ID: RLB-F-US-CFTC-FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024-Q002. RegLegBrief AI Hallucination Research, published 2026-06-04. https://reglegbrief.com/regulators/j3/us/cftc/fcm-dco-customer-funds-investments-reg-1-25-2024/sectors/investment_banking/compliance/finding/US-CFTC-US-001-FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024-v1-002/
RegLeg Specialist Panel. (2026). Finding#2 — Dollar-weighted average maturity exclusion clause [Hallucination finding RLB-F-US-CFTC-FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024-Q002]. RegLegBrief AI Hallucination Research. https://reglegbrief.com/regulators/j3/us/cftc/fcm-dco-customer-funds-investments-reg-1-25-2024/sectors/investment_banking/compliance/finding/US-CFTC-US-001-FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024-v1-002/
RegLeg Specialist Panel, Finding#2 — Dollar-weighted average maturity exclusion clause [RLB-F-US-CFTC-FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024-Q002], RegLegBrief AI Hallucination Research (June 04, 2026), https://reglegbrief.com/regulators/j3/us/cftc/fcm-dco-customer-funds-investments-reg-1-25-2024/sectors/investment_banking/compliance/finding/US-CFTC-US-001-FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024-v1-002/.
@misc{reglegbrief_RLB_F_US_CFTC_FCM_DCO_CUSTOMER_FUNDS_INVESTMENTS_REG_1_25_2024_Q002,
author = {RegLeg Specialist Panel},
title = {Finding#2 — Dollar-weighted average maturity exclusion clause},
year = {2026},
publisher = {RegLegBrief AI Hallucination Research},
note = {Hallucination finding Citation ID: RLB-F-US-CFTC-FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024-Q002},
url = {https://reglegbrief.com/regulators/j3/us/cftc/fcm-dco-customer-funds-investments-reg-1-25-2024/sectors/investment_banking/compliance/finding/US-CFTC-US-001-FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024-v1-002/}
}