Marc Lackritz, president of the Securities Industry Association, in testimony today before a U.S. Senate panel, called for greater disclosure, tough enforcement actions, and other reforms to ensure that mutual-fund investors’ interests are well-protected.
The SIA is the private-sector regulator of the U.S. securities industry.
“Investors must be assured that fraud, self-dealing, and dishonesty will not be tolerated. Investors should be treated fairly, and should be given complete, clear, and useful information about the funds they buy. All aspects of the mutual-fund business — including fund fee structures, financial incentives offered to intermediaries, fund investment and redemption policies, and fund governance — must be as transparent as possible. And, all investors should be assured of prompt execution and fair pricing of their mutual-fund transactions,” Lackritz told the Senate Governmental Affairs Subcommittee on Financial Management, the Budget, and International Security.
Lackritz supported disclosure of “revenue-sharing arrangements” (where a fund adviser or distributor pays additional compensation to a broker-dealer selling those funds), fund operating expenses and “soft dollars” (arrangements in which the broker-dealer handling transactions for a fund may use some of the commissions it earns on such trades to pay for “research-related” services).
He said that the industry supports providing expense information based on a hypothetical US$1,000 investment for a particular fund’s return and a hypothetical 5% return. He also supports soft dollar disclosure and enforcement for soft dollar abuses. “Improved disclosure should provide investors with timely, clear information in a useful format so that they can make informed investment decisions,” Lackritz said. “This would foster fierce competition, which affords investors broader investment choices at the lowest possible cost.”
The SIA, supports a “hard close” at 16:00. ET. “Late trading has had a terribly corrosive effect on investor confidence. We must find and implement an effective remedy now,” Lackritz said.
He also stressed the importance of “swift, sure, and tough enforcement actions” as proper remedies for violations of the law, and emphasized the industry’s support of federal agencies, self-regulatory organizations, and state law-enforcement authorities in stopping “wrongdoers in their tracks.”
Fund business must be as transparent as possible: SIA
Industry group supports disclosure of "soft dollars"
- By: IE Staff
- January 27, 2004 January 27, 2004
- 15:35