The Investment Company Institute's general counsel today blamed regulators for failing to resolve uncertainties about how new rules will affect the mutual fund industry.
Among the ICI's top concerns is whether Congress will deem mutual funds to be “systemically significant” and thus regulated by the Financial Stability Oversight Council.
“We've been through two rounds of comment on how the FSOC will make these designations, and there's still not much that we can say for sure about which companies will be designated,” Karrie McMillan, general counsel of the ICI, said today at the ICI's Mutual Fund and Investment Management Conference, being held in Palm Desert, Calif.
Money market reform and 12(b)-1 reform are other areas of uncertainty that Ms. McMillan cited. She also noted that some fund executives may be surprised to learn about the potential impact that the Securities and Exchange Commission's proposed whistleblower program may have on their firms.
Under Dodd-Frank, the SEC and
Commodity Futures Trading Commission created a bounty program to reward informants who report violations of securities and commodities regulations.
“But how can you maintain that strong compliance program if your employees know that the SEC is dangling a rich reward for those who bypass internal reporting?” Ms. McMillan asked.
All of this uncertainty is causing much frustration within the industry, “particularly when regulators seek to impose rules that ignore basic facts about the structure, operation, and regulation of our funds,” she said.
For example, the SEC's proposed amendment to the pay-to-play rules could be cumbersome for fund firms.
In the wake of cases in which employees made campaign contribution to win contracts for managing public pension assets, the proposal would increase the reporting requirements for how firms monitor and screen contributions.
Ms. McMillan believes the plan would put “fund advisers on the hook for account information that they don't control and can't get.”
She added that unless the SEC or Financial Industry Regulator Authority Inc. creates similar reporting requirements for brokers and other intermediaries that operate omnibus accounts, fund advisers will not be able to comply with the new pay-to-play rules.
Ms. McMillan struck a more conciliatory tone, praising the SEC and other regulators for all they have done given, their workload, and for allowing for longer comment periods.
