Mutual fund industry calls for superregulator

The mutual fund industry today called for combining the Securities and Exchange Commission and the Commodity Futures Trading Commission into a one entity to regulate the capital markets. In a white paper, “Financial Services Regulatory Reform: Discussion and Recommendations,” released this morning, the Investment Company Institute of Washington joined the Securities Industry and Financial Markets Association of New York and Washington in endorsing the idea of a “systemic-risk” regulator aimed at ensuring stability for the financial system. But ICI cautioned “that very careful consideration should be given to this regulator’s authority to ensure that it doesn’t stifle sensible innovation on beneficial competition” or displace any primary regulator. Dubbed the Capital Markets Regulator by the ICI, the new agency would have the power to address gaps in regulation related to hedge funds, derivatives and municipal securities. That regulator also would harmonize the legal standards for investment advisers and broker-dealers — a long-simmering issue among the two groups. “Establishing the Capital Markets Regulator presents a very valuable opportunity to ‘get it right’ in terms of how the agency is organized and managed,” the ICI said in its report. The institute also called for consolidating bank regulators, which bankers have traditionally opposed, as well as authorizing an optional federal charter for insurance.