he SEC has responded to the House Financial Services Committee request for information about the fund industry. The committee is considering whether the fund industry needs more oversight or if additional regulation or disclosures are needed to protect investors in funds.
SEC Chairman William Donaldson sent the 120-page report to Capital Markets Subcommittee Chairman Richard H. Baker (R, Louisiana) this morning. Baker's subcommittee is spearheading Congress' look into the industry. Baker hinted this morning that he would use the report to pinpoint areas in which Congress needs to take action to protect investors. Those areas include mutual fund disclosures and corporate governance, according to a statement released by the Congressman.
Meanwhile, the Investment Company Institute had no immediate comment on the lengthy report penned by Paul Roye, head of the SEC's Division of Investment Management. It did say that it is reviewing the report and expects to work with Congress and the SEC.
"We remain committed to maintaining the trust of mutual fund investors and working constructively and expeditiously with Congressional leaders and the SEC to make our strong system of regulation even stronger. With this in mind, and a goal of bolstering investor confidence and serving the interests of mutual fund investors, we will study the reports carefully," said Matthew Fink, president of the ICI in a statement.
Initial reviews of the report suggest that the SEC is looking at ways to increase the amount of information about fees and expenses funds must disclose. One key area may be more accounting of revenue sharing practices inside of the fund industry. That would presumably include how funds use their sub-TA fees and other ways that they pay for shelf-space with distributors.
The complete report can be viewed at http://financialservices.house.gov/media/pdf/02-14-70%20memo.pdf
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