The SEC's announcement last week that its top official overseeing the mutual fund industry will leave in November caught many by surprise.
As head of the Securities and Exchange Commission's Division of Investment Management for the past four years, Andrew J. “Buddy” Donohue helped shape many of the rules and regulations governing the $10.5 trillion fund industry, including proposals aimed at discouraging so-called pay-to-play practices and boosting investor-oriented disclosures related to target date funds and investment adviser brochures.
“He had a personal agenda that largely appears to be where he wants it to be,” said Barry Barbash, a former director of the SEC's Division of Investment Management and now a partner at Wilkie Farr & Gallagher LLP.
That said, Mr. Donohue pursued that agenda “without being over-regulatory,” said Christopher Robertson, a partner at Seyfarth Shaw LLP and a former senior counsel at the SEC's enforcement division.
“He navigated a lot of input from a lot of different sources about what the rules look like and how they're implemented,” he said.
During his tenure at the SEC, Mr. Donohue also has been a vocal supporter of the commission's recent efforts to overhaul the way 12(b)-1 fees are imposed and disclosed.
Last month, the SEC introduced a draft rule that would limit mutual fund sales charges to investors, capping at 0.25% annually the amount that could be taken out of assets for “marketing and service.”
In addition, the proposal would enhance disclosure of distribution fees and allow broker-dealers to set their own sales charges.
Not only is Mr. Donohue leaving with the final form of the 12(b)-1 rule still unresolved, but he is also stepping aside from the massive agenda handed to his division by the Dodd-Frank financial-reform legislation, which requires the SEC to promulgate 95 rules and conduct 17 studies over the next year or so.
“There's no good time for someone like that to leave, but four years is a long time to be in that job,” said Joel Goldberg, who led the SEC's investment management division in the early 1980s and is now a partner at Stroock & Stroock & Lavan LLP.
“The division is going to have a lot of projects to get finished in the next year or two, and he probably figured this was a logical time to break it off,” he said.
Observers speculate that Mr. Donohue, 59, is at an age where he can change the direction of his career at least one more time. Prior to the SEC, he was general counsel at Merrill Lynch Investment Managers, overseeing legal and regulatory compliance for more than $500 billion in assets, including mutual funds, fixed-income funds, hedge funds, private equities and managed futures.
Mr. Donohue previously spent more than a decade as executive vice president and general counsel at OppenheimerFunds Inc.
“I'll evaluate opportunities later,” he told sister publication Pensions & Investments last week. “It's time to take on my next adventure.”
At a Practising Law Institute meeting in April, Mr. Donohue said that he regretted having made little progress in revising the outdated books-and-records rules for advisers and investment companies. But he also said he was gratified that recent court decisions appear to have affirmed his division's views on appropriate levels of advisory fees.
The lieutenants who Mr. Donohue is leaving behind at the SEC are capable of carrying on the work without missing a beat, said Robert Kurucza, a partner at Goodwin Procter LLP and a former associate director of the investment management division at the SEC.
“There's significant stability in the division,” Mr. Kurucza said.
E-mail Mark Schoeff Jr. at [email protected] and Jed Horowitz at [email protected].
