More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
Securities and Exchange Commission Chairwoman Mary Jo White (left) said Friday that further reforms to money-market funds are coming “in the near future,” but remained tight-lipped regarding specifics on those changes.
White, who made her remarks before the Investment Company Institute’s annual conference in Washington on her 18th day as SEC chief, focused most of her prepared comments on the SEC’s role in the increasingly global and financial regulatory system, noting that money-market funds are “global investors and are an area of focus for international regulators as well.”
As the money fund regulation moves forward, White said, “I am hopeful that we can build upon the SEC’s past coordination with global regulators to develop approaches that are consistent, workable and effective.”
As the agency ”works to develop and propose meaningful money-market fund reform,” she continued, its goal is “to preserve the economic benefits of the product while addressing potential redemption pressures and the susceptibility of these funds to runs—runs in which retail investors are especially likely to suffer losses.”
One of several changes being contemplated at the agency would “require only the riskiest funds—or ‘prime’ money funds—to abandon their fixed $1 share price and allow shares to float in value like other mutual funds,” according to the Wall Street Journal. More than $300 billion, or 15% of prime-fund assets, fled the funds in one week after the collapse of Lehman Brothers Holdings in September 2008, the Journal reported.
Noting that the proposed rules will take into account “the views of commissioners who vary in background and perspective,” White said that sound economic analysis that is “well-informed by the public” will be part of the process as the agency proposes money-market fund reform.
In brief comments to reporters after her remarks, White said that her priorities at the agency remained the same as the ones she laid out during her testimony before the Senate Banking Committee in mid-March.
White told lawmakers during her testimony that finishing rulemakings under the Dodd-Frank and JOBS acts “in as timely and smart a way as possible” would be her top priority at the agency, but also noted that reviewing the comments on the “potential regulatory costs to implement potential changes to fiduciary standards for broker-dealers and investment advisors” would be a priority as well.
During her prepared remarks, White told ICI attendees that the fund industry “stands as a clear example of financial globalization and the scope of the regulatory challenge we face.”
The global mutual fund industry, she said, now has representation in 45 countries and manages nearly $27 trillion in assets tied to markets across the globe. Almost half those assets—more than $13 trillion—were managed by the roughly 7,600 mutual funds domiciled in the United States, White said.
“Many of those funds invest in foreign issuers listed in the U.S. or they invest overseas. Consequently, if there is an accounting scandal in Brazil or a market disturbance in Frankfurt or Hong Kong, American clients of these funds can be harmed.”
The ICI itself, White continued, “has acknowledged the growing global footprint of the mutual fund industry and the need for international regulatory coordination.”
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