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September 29, 2015 at 09:46 AM
Future regulatory measures that will “keep alive” the promise of the Investment Company Act and the Investment Advisers Act include third-party exams for advisors, a uniform fiduciary rulemaking, transition planning rules for advisors as well as annual stress testing for large investment advisors and funds, Securities and Exchange Commission Chairwoman Mary Jo White said Tuesday.
Speaking at the SEC’s event to celebrate the 75th anniversaries of the Investment Adviser and Investment Company Acts at SEC headquarters in Washington, White said that the aforementioned upcoming rules are part of the agency’s “ambitious agenda” to address evolving risks for funds and advisors. White also noted the recently proposed rule to enhance data reporting by investment companies and advisors, as well as the rule proposed on Sept. 22 to require open-end funds to enhance their liquidity risk management.
“As we speak,” White said, staffers are also developing recommendations she hopes to advance for the Commission’s consideration by the end of this year related to the use of “derivatives by funds, including measures to appropriately limit the leverage these instruments may create, as well as enhancing risk management programs for such activities.”
While asset management pioneers as well as former SEC chairmen concurred at the event that the Acts have stood the test of time — with the Investment Company Act helping to spur growth in the $90 trillion fund industry — they nonetheless noted ongoing challenges the agency faces in crafting regulations, namely for exchanged-traded funds.
Vanguard founder John Bogle as well as James Riepe, retired vice chairman of Baltimore-based T. Rowe Price, where he is now a senior advisor, differed on their views as to whether ETFs are actually mutual funds.
While the principles of the ‘40 Act “have been remarkably stable and accurate,” Riepe said, “I think the products and services have become so complex it has become more and more difficult to interpret the Act into regulation.”
A “very good” example of this, he said, is in ETF regulation. ETFs “don’t belong under mutual funds,” he said. “I think we’re trying to force a square peg into a round hole by trying to force ETFs into ‘40 Act regulation.”
