The SEC wants to know which mutuals are playing with 'fire' and and how they're playing with 'fire' - or, in this case, 'derivatives', which have been under scrutiny since being (rightfully) blamed for causing havoc during the credit crisis.  Given its concerns, the SEC is now weighing new rules for mutual funds that invest in the complex securities. The commission yesterday agreed unanimously to call for comments from the industry and investors about the potential need for tougher restrictions on mutual funds' use of derivatives.  Called a concept release, it's one of the first steps in the agency's rule-making. The call to comments is sure to start a lengthy discussion about mutual funds' use of derivatives, which Dealbook calls an "an often-overlooked feature of the investment company world." As it stands currently, regulators have little say over the derivatives market.  The entire investment company industry was until recently regulated under the Investment Company Act of 1940, which was created before the modern derivatives market existed. Dodd-Frank has updated the law to hep regulated the $600tn derivatives market.  But the act did not address the increasing use of derivatives by mutual funds.  The SEC has thus been left without a specific mandate from Congress.  The call to comments and the lengthy discussion ahead are signs that the SEC is proceeding with thorough caution. [Dealbook, 8/31/11]