Reg Rigmarole Crippling Fund Firms

Mutual fund officials told Congress last month that fund firms are drowning in the deluge of SEC rules they’ve come under in the last year and a half. Paul Schott Stevens, president of the Investment Company Institute, told the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises on May 10 that the cost of complying with the SEC rules is proving to be overbearing for fund firms, and that “the SEC must conduct a more informed and rigorous analysis of the relative costs and benefits of its regulatory requirements” in future rulemakings.

One example of inadequate cost/benefit analysis by the SEC is the Commission’s recent voluntary redemption fee ruling, Stevens said. He said the rule “requires all funds, even those that do not impose redemption fees, to enter into written contracts with each and every ‘intermediary’ with which they do business.” The word “intermediary” is broadly defined under the rule, he noted. “To comply with this requirement, funds will have to first identify the universe of their ‘intermediaries’ and then either modify any existing agreements or enter into new agreements containing the terms required by the rule,” Stevens said. “The SEC failed to appreciate the enormity of this task.”