SEC Investment Management chief Norm Champ
treated fundsters to a surprise triple-dose of himself this morning at the ICI
's Investment Management
Champ added two panels after his keynote this morning at the JW Marriott Desert Palm in Palm Desert, California, after two SEC speakers cancelled
because of budget cuts caused by the sequester.
In order to keep up with rapidly accelerating trends in the mutual fund industry, SEC investment management chief Norm Champ
wants his division to steal a play from the great one himself, Wayne Gretzky
— to go where the puck will be and not where it is. Champ made these comments this morning in his keynote address.
Going to where the puck will be involves a number of new, and ongoing initiatives, designed to improve the investigative and data-gathering abilities SEC staffers.
"We are working to enhance our eyes and years, getting a better -- and more first hand, understanding of the workings of the fund industry," Champ told fundsters. "We are expanding our source of knowledge so it doesn't just come from sitting behind a desk in Washington, D.C., but comes from talking with you."
To that end, the division has launched a new data-gathering and analytical arm dubbed the Risk and Examinations
group. The purpose of the group, he said, is to conduct rigorous and quantitative analyses of asset managers and the products they offer to better inform the regulator of all of its actions.
One element of this data-gathering will involve increased visits by Champ staffers with mutual fund executives — with many of these initially being conducted with staffers of the SEC's Office of Inspections and Examination.
The goal of these dialogues, conducted at the headquarters of many fund firms, will be to get a better sense of systems and controls and culture of the fund firm, he said.
"We will be better regulators if we have a better understanding of your businesses," he said.
One part of this increased dialogue, Champ said, will involve frequent meetings with the independent directors of fund boards.
"Fund directors serve an exceedingly important role, they serve as the eyes and ears of fund investors. Directors even serve in part as the eyes and ears of regulators. Regulators can't be everywhere. We have to leverage gatekeepers and overseers like directors," he said.
Champ said that this dialogue will involve "some tough questions" with directors, like on where these directors believe they are adding value and where they believe their oversight is more difficult to manage.
Other questions would include: Do fund directors feel they are overextended? Are their responsibilities being properly allocated? Are they focused on where they can provide the most value? Are directors being asked to oversee too many funds?
"How many is too many? Is it 4, 14 or 140?" Champ asked.
A lot of discussion will also focus on the issue of fees: such as those paid to subadvisors, those tied to securities lending, and so on.
Champ then asked for help from the audience in these initiatives. He said that his staff will increase with lawyers, accounting firms and other experts to gain better insights on a myriad of issues.
"If there are good practices, or poor practices, out there that you are aware off, please bring them to our attention," he said.
The expansion of the Investment Management division's eyes and ears also involved continuous hiring in this department, according to Champ. He noted recent hires such as risk expert Sharon Pichler
and Dan Townley
, among others.
Along with these hires, Champ said there are ongoing efforts to improve internal coordination between all arms of the regulator.
The last major element of the eyes and ears initiative involves ongoing work to bolster the SEC's technology systems for gathering data on most mutual funds. Champ noted that thanks to Dodd-Frank, his agency iss now receiving, for the first time ever, in-depth data on private equity and hedge funds. The agency is also, of course, collecting much more data related to money market funds.
However, he said, the SEC still lacked a comprehensive and efficient means for collecting data on the "great swath of funds between money market and hedge funds," i.e. mutual funds.
"We have a hodge podge of data collection and reporting forms for your industry. Many have long acronyms and bureaucratic sounding names and even more bureaucratic sounding technology, including a a form that uses a DOS system, kept alive only for filing that form," he said.
"We want funds to be able to report to us quickly, efficiently and accurately," he said.
Part of this effort will include initiatives to streamline and cut down on the number of forms asset manages will need to fill to be in compliance, in addition to bolstered internal technology, Champ said.
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