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Statement of the
Investment Company Institute
U.S. Securities & Exchange Commission’s
Appropriations for Fiscal Year 1999
Investment Company Institute
1401 H Street, N.W.
Washington, D.C. 20005
The Investment Company Institute* appreciates this opportunity to submit testimony to the Subcommittee in support of the FY 1999 Appropriations request for the Securities and Exchange Commission (SEC). The Institute would like to commend the Subcommittee for its prior efforts to assure adequate resources for the SEC.
Mutual funds are very important to middle class Americans seeking to save and invest. Today, more than 65 million investors, at least one in every three households, own mutual fund shares. Mutual fund shareholders have a median household income of $50,000. These millions of average Americans receive and deserve vigilant regulatory oversight over mutual funds. Given the increasing importance of mutual funds to millions of investors, sufficient funding of the SEC should be a priority. The Institute urges Congress to provide appropriations at a level sufficient to ensure that the SEC may fulfill its regulatory mandate.
The Administration’s FY 1999 Budget proposes SEC funding at a level of $341.1 million. The Institute supports this level of funding to support the SEC’s operations, especially those of the Division of Investment Management, which regulates the mutual fund industry.
Adequate financial resources for the SEC are essential to continue effective regulatory oversight and afford important investor protection and awareness initiatives. Several important SEC initiatives portend an increase in the workload of the Division of Investment Management. First, the SEC has adopted rules to require the use of plain English in mutual fund prospectuses. Second, the agency has adopted substantial revisions to the required disclosure in mutual fund prospectuses, including the requirement that it be simplified to provide essential information about a particular fund in a concise, less technical manner. In addition, the SEC has adopted a rule that would permit mutual funds to use fund "profiles," which summarize key information about the fund in a concise, standardized form. The implementation of these important initiatives, which will benefit millions of American investors, will require additional staff to work with mutual funds as they revise their prospectuses and to review fund profiles. Adequate funding is also needed for routine inspections of investment advisers and fund companies, as well as special projects involving investor protection, such as monitoring the Year 2000 conversion project. It is for these and other reasons that Chairman Levitt is seeking additional staff in the Division of Investment Management.
Finally, adequate funding is essential to the SEC’s efforts to educate this nation’s investors. The SEC recently has instituted several unprecedented outreach programs, such as nationwide Investor Town Meetings and the upcoming "Facts on Saving and Investing Campaign" at the end of March. These programs assist investors and small businesses to understand capital markets and establish realistic expectations about market performance. This is an integral part of the agency’s mission to protect investors.
In order to accomplish these worthy objectives and to continue to function as an effective regulatory agency, we support that the SEC be funded at the level requested by Chairman Levitt.
We appreciate your consideration of our views.
*The Investment Company Institute (Institute) is the national association of the American investment company industry. Its membership includes 6,896 open-end investment companies ("mutual funds"), 436 closed-end investment companies, and 10 sponsors of unit investment trusts. Its mutual fund members have assets of about $4.505 trillion, accounting for approximately 95% of total industry assets, and have over 62 million individual shareholders.