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Statement of the Investment Company Institute On the U.S. Securities and Exchange Commission’s Appropriations for Fiscal Year 2008
Submitted to the Subcommittee on Financial Services and General Government Committee on Appropriations U.S. House of Representatives
April 13, 2007
The Investment Company Institute appreciates this opportunity to submit testimony to the Subcommittee in support of the Administration’s FY 2008 Appropriations request for the Securities and Exchange Commission (SEC). We commend the Subcommittee for its consistent past efforts to assure adequate resources for the SEC.
Mutual funds are an integral part of the U.S. economy and continue to be one of America’s primary savings and investment vehicles for middle-income Americans. Since 1990, the percentage of U.S. retirement assets held in mutual funds has more than quadrupled. Today, more than 96 million investors in nearly 55 million U.S. households own mutual fund shares; the median household income of fund shareholders is $68,700. These millions of ordinary Americans continue to recognize that mutual funds are the best means of achieving their long-term financial goals. They deserve and benefit from continued vigilant regulatory oversight of mutual funds.
In addition to their role as the investment vehicle of choice for millions of Americans, mutual funds are major investors in securities and participants in the marketplace. As such, they have a strong interest in assuring the SEC’s continued ability to soundly and effectively regulate securities offerings, other market participants, and the markets themselves.
For all of these reasons, sufficient funding of the SEC is critically important to the Institute and its members.
The Administration’s FY 2008 budget proposes SEC funding at a level of $905.3 million, which is a very slight increase from the $904 million appropriated in FY 2007. The SEC has determined that this level provides it with adequate funding to fulfill its regulatory mandate and to continue protecting the nation’s investors. Accordingly, the Institute urges Congress to provide appropriations at this funding level.
We believe it is significant that the SEC has specifically requested funding to allow it to continue to invest resources in technology. We are particularly pleased that the top strategic priorities for the SEC’s Division of Investment Management include revamping the mutual fund disclosure regime by making disclosures more useful to investors through better use of new technologies, such as interactive data tagging (XBRL) and the Internet. Division Director Andrew Donohue recently outlined plans to develop a short-form disclosure document for fund investors, which would be coupled with giving investors the ability to obtain additional information via the Internet or in paper form.1As Director Donohue said, mutual fund shareholders “deserve a streamlined disclosure system that better meets their needs and is consistent with the manner in which most Americans retrieve and process information in the 21st century.” We agree, and we strongly support funding for these important initiatives.
While providing adequate funding is vitally important, it is equally important that the SEC deploy available resources in ways designed to assure the effectiveness of its regulatory and law enforcement efforts. We therefore strongly support the continued focus on internal reforms that will improve the performance of the SEC. This includes, for example, providing regulatory guidance that better anticipates issues, developing closer integration of the activities of different SEC divisions and branch offices, implementing new inspection strategies, and conducting empirical research that informs major rulemakings. Indeed, the importance of these kinds of reforms has been underscored in a series of recent reports.2We support appropriate funding of the SEC to facilitate these and other initiatives to enhance the effectiveness of the SEC.
In conclusion, the SEC and the fund industry share a common objective of assuring that mutual funds remain a vibrant, competitive and cost effective way for average Americans to access the securities markets and realize their long-term financial goals. Future regulatory and oversight actions by the SEC will play a key part in this process. It is therefore critically important that the SEC have sufficient resources to enable it to be an effective and efficient regulator and fulfill its mission of protecting the nation’s investors, including the more than 91 million Americans who own mutual funds. Accordingly, we support providing the SEC with the requested level of funding.
We appreciate your consideration of our views.
The Investment Company Institute is the national association of American investment companies. ICI members include 8,821 open-end investment companies (mutual funds), 664 closed-end investment companies, 385 exchange-traded funds, and 4 sponsors of unit investment trusts. Mutual fund members of the ICI have total assets of approximately $10.481 trillion (representing 98 percent of all assets of US funds); these funds serve approximately 93.9 million shareholders in more than 53.8 million households.
1Speech by SEC Director of the Division of Investment Management Andrew J. Donohue, Keynote Address at the 2007 ICI Mutual Funds and Investment Management Conference, March 26, 2007.
2See Interim Report of the Committee on Capital Markets Regulation (November 30, 2006, as revised on December 5, 2006); Report of the U.S. Chamber of Commerce, Commission on the Regulation of U.S. Capital Markets in the 21st Century (March 2007); and Sustaining New York’s and the U.S.' Global Financial Services Leadership (January 2007).