Institute President Addresses Investor Confidence in Remarks at Mutual Fund Conference

Washington, DC, April 9, 2003 - Institute President Matthew P. Fink highlighted the industry's dedication to restoring investor confidence, and its efforts to keep up with a number of recent SEC regulatory initiatives, in his address at the Institute's 2003 Mutual Funds and Investment Management Conference.

Fink noted that the SEC staff has completed one of the busiest and most demanding years in SEC history, and that the industry has been working intensely to keep pace. He stressed that, despite the challenges faced by fund companies and their equity fund shareholders over the past 37 months, the mutual fund industry continues to serve investors well.

Maintaining Investor Confidence. Fink stated that the mutual fund industry has earned the confidence of millions of investors because it has made protecting shareholders its first priority. Toward that end, the industry has resisted efforts to weaken the 1940 Act and the investor protections it offers, supported tough new SEC restrictions, and adopted voluntary standards in areas such as personal investing and fund governance.

Endorsing Effective Regulation. Fink pointed out that, contrary to some industries, the mutual fund industry has supported regulation when it was warranted, including support for the enactment of the Sarbanes-Oxley Act. It likewise has endorsed a series of regulatory reforms, including those relating to disclosure of portfolio holdings and fund fees in shareholder reports. Fink urged regulators to resist unnecessary regulation that might distort decision-making and chill innovations in a manner that would be harmful to fund investors.

Focusing on Fund Fees. Fink discussed the current focus on fund fees, and cited a recent GAO report, which confirmed the existence of positive fee trends that, over the long-term, have produced substantially lower costs for fund shareholders. The report noted that, as assets in some equity funds declined, the expense ratios increased slightly. Fink observed that this is consistent with earlier findings relating to economies of scale.

Working with Legislators and Regulators. Fink also mentioned recent letters from Congress to the SEC on various aspects of the mutual fund industry. The industry stands ready to provide information and assistance, and remains open to regulatory changes that will inform, rather than confuse, fund investors. He expressed reservations about the SEC's initiative to re-examine the desirability of creating a mutual fund self-regulatory organization. According to Fink, strong day-to-day regulation by the SEC has kept the fund industry strong and free from systemic scandal. To continue this tradition, the industry supports adequate funding for the SEC.

Advancing Shareholders' Interests. Although effective SEC regulation and oversight are "front and center," Fink highlighted the industry's interest in other systems of regulation that may advance the interests of our shareholders. Fink expressed support for the Bush Administration's plan to simplify the system for long-term saving in this country, and for legislation that would allow 401(k) participants to receive advice, defer taxes on reinvested capital gains until fund shares are sold, and eliminate double taxation of dividends.

In closing, Fink noted that the industry has embraced comprehensive pro-investor regulation and has been a strong supporter of the SEC's mission to protect investors. He exhorted industry participants to keep up the good work. "By putting our shareholders first-in both good and difficult times-I have no doubt that our shareholders and our industry will prosper."