The Volcker Rule, which was intended to curtail risky bets by banks, may also send a chill through the mutual fund industry.

At least, that's what Investment Company Institute (ICI ) president Paul Stevens thinks. The ICI's president told MarketWatch that the rule could seriously disrupt the mutual fund business.

“This could have the effect of essentially barring banking entities from sponsoring the most highly regulated type of investment vehicle [mutual funds] and, thereby, limiting investment options for investors,” Stevens said.

“Chief among our concerns is the fact that the proposal could treat many [mutual funds] as hedge funds -- a result that contradicts the plain language that Congress passed,” he added.

The problem is that newly launched mutual funds often rely on seed capital from bank-owned subsidiaries. And, the Marketwatch reporter notes, "if mutual funds were captured by the Volcker Rule, these bank investment units would have major problems setting up mutual funds."

See the full story here.  

Edited by: Chris Cumming


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