SEC commissioner Paul S. Atkins is continuing his campaign for a "new-product czar" to shepherd products through the agency's Byzantine approval process.
That czar would be responsible for overseeing the new-product-approval process within the Securities and Exchange Commission.
Specifically, the czar would coordinate the activities of the relevant parts of the SEC to ensure that all aspects of the proposed new vehicle are considered in an orderly, efficient and timely manner, Mr. Atkins said in one of several recent public speeches on the subject.
Mr. Atkins envisions the czar as an antidote to the "silo mentality" perpetuated by the many different divisions in the SEC, each claiming authority over new products, he said.
The SEC has long been criticized for taking too long to approve new financial products. In recent years, much of that criticism has involved exchange traded funds — certain types of which have been held up for years.
While a recent SEC rule proposal to allow some ETFs to be brought to market without having to obtain individual exemptive orders will hasten the approval process, a new- product czar would ensure that ETFs — and other financial instruments — don't languish within the SEC, Mr. Atkins said.
"Even within the SEC, there are questions about where one division's work ends and another's begins," Mr. Atkins said last week at the New York- and Washington-based Securities Industry and Financial Markets Association's annual seminar in Orlando, Fla. "New products that are clearly within the SEC's purview have also gotten caught in regulatory limbo."
John Heine, a spokesman for the SEC, declined to elaborate on Mr. Atkins' comments.
Despite Mr. Atkins' enthusiasm for the idea, some industry experts question whether a czar would do more harm than good.
"It's an interesting idea, but it needs to be examined through the larger context," said Jay S. Neuman, a partner with the Pittsburgh-based law firm Reed Smith LLP. "It could turn out to be just another silo."
The creation of a new-product czar could create "unintended dynamics" within the SEC, especially because it's unclear that such a czar is needed, Mr. Nueman said.
Ironically, ETFs provide the best illustration of why a new-product czar isn't necessary, said Jeff Ptak, director of exchange traded securities analysis at Morningstar Inc. of Chicago.
In 2007, the universe of ETFs nearly doubled to 629 funds and $608.4 billion in assets, from 359 funds and $422.5 billion in assets in 2006, according to the ICI.
"It doesn't seem like ETF providers have struggled to come up with new products," Mr. Ptak said.
ETF providers, however, tell a different story.
ProShare Advisors LLC of Bethesda, Md., which offers 60 ETFs, spent more than six years waiting on the SEC before it was finally able to bring its first ETFs to market in 2006, said Michael L. Sapir, chief executive of ProShare and its sister company, ProFund Advisors LLC.
"While we were pending review at the SEC, comparable products to ours came out in foreign jurisdictions," Mr. Sapir said. "Having a nimble new product mechanism at the SEC would potentially have enhanced our global competitiveness."
For some ETF providers, the ability to compete domestically is also put at risk by a long SEC approval process, said Jane A. Kanter, a Washington-based attorney with Dechert LLP of Philadelphia.
It puts the provider who first goes through the process at a disadvantage, because it paves the way for others to get the same approval for similar products without the same amount of fuss, she said.
A new-product czar could be helpful in ensuring a level paying field, Ms. Kanter said.
"It seems very reasonable to me," she said.
That's not to say the SEC hasn't made considerable progress in speeding up the approval process, at least concerning ETFs, said Bruce Lavine, president of WisdomTree Investments Inc. of New York.
But a czar could still be helpful, he added.
"Historically, there has not been as much of a dialogue as there could have been about new products," Mr. Lavine said. "To the extent there are ways to encourage an ongoing dialogue, I think that's constructive."
It's not just ETF providers who would benefit from such a dialogue.
Asset managers are beginning to develop new investments designed to appeal to retiring baby boomers looking for distribution, not accumulation, said Tom Conner, a partner in the financial services practice at Sutherland Asbill & Brennan LLP in Washington.
For example, several firms have filed with the SEC for an investment product that blends mutual funds with insurance guarantees, he said.
"That's another example of a new type of product that will take a significant amount of time" to make it though the SEC approval process, Mr. Conner said.
A new-product czar would be a "useful tool," potentially allowing such products to make it to market faster, he said.
Of course, the fact that Mr. Atkins supports the creation of a new-product czar doesn't necessarily mean it will become a reality.
The SEC is dealing with many issues and potentially faces massive change.
For example, Treasury Secretary Henry Paulson has suggested merging the SEC with the Commodity Futures Trading Commission.
Given such an environment, it seems unlikely that SEC Chairman Christopher Cox will take up the issue of a new-product czar, said Ms. Kanter.
But Mr. Conner said he is hopeful that the idea will become reality.
"It seems very consistent with the tenor of the proposals that have been floated by various federal agencies," he said.
E-mail David Hoffman at [email protected].
