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ARCHIVE
2020 Annual Report to Members: A Conversation with IDC Managing Director Thomas Kim
By Thomas Kim
January 21, 2021
As Thomas Kim finished his first year as IDC's managing director, he sat down to discuss the organization’s priorities. Below is an abridged version of his conversation. To read the full Q&A, please see ICI’s 2020 Annual Report to Members.
How did IDC adapt to the challenges posed by the COVID-19 crisis?
Early in the crisis, IDC engaged in regular conversations with SEC staff to seek a broadening of relief from in-person board meeting requirements. We understand that they are considering ways in which relief could be made permanent. With the technology available today, it is important that rules be modernized to allow fund boards to interact in effective and flexible ways, and we look forward to ongoing conversations with the SEC on this issue.
IDC also kept the director community informed about current conditions during a period of market volatility, and we adapted our programs to a virtual environment. Members of the Governing Council and other fund directors provided real-time insights on the needs of the independent director community. Through frequent check-in calls with them and collaboration with ICI colleagues, IDC mobilized to deliver the strongest programming possible to independent directors during this time.
What are the top policy developments that IDC worked on this year?
One of the most important developments has been fair valuation. We commended the SEC for developing its proposed rule. While the modernized framework contained many positive elements, IDC also commented on some prescriptive elements in the rule with recommendations for modifications.
The SEC adopted the fair valuation rule in December and recognized the complementary roles that fund boards and advisers play in the fair valuation process and the discretion they exercise. The final rule also was responsive to a number of IDC recommendations that addressed the prescriptive nature of the proposed rule.
Another important development IDC worked on this year was the SEC’s re-proposed rule on the use of derivatives in investment management. IDC submitted a supportive comment letter but recommended some modifications about how fund boards should oversee derivatives risk managers. The SEC’s final rule released in October reflected a far better approach than the SEC’s 2015 proposal and improved upon the re-proposal issued in November 2019. The final rule provided greater flexibility for fund boards to determine the frequency and content of board reports and clarified the fund board’s role in approving the designation of a derivatives risk manager.
Finally, and very relevant to the independent director community, was the temporary relief the SEC granted relating to in-person meeting requirements for fund boards.
How is IDC carrying out its mission to educate and offer peer-to-peer engagement for the independent director community during the COVID-19 crisis?
To make sure that fund boards wouldn’t miss a beat during the coronavirus crisis, we pivoted quickly to deliver our educational offerings on a virtual basis. That started with expanding our webinars and conference calls, both in frequency and content, to ensure we were informing and helping fund boards during a period of market volatility. In addition, we launched virtual roundtables in lieu of in-person chapter meetings. Similarly, we are offering our Foundations for Fund Directors educational program virtually.
We also hosted IDC’s first virtual fund directors conference to take the place of the meeting that usually occurs in Chicago. We saw record attendance and are very pleased with the response from independent directors. While we look forward to returning to in-person conferences and meetings, we’re ready to deliver top-notch programming virtually as long as that’s necessary.
Thomas Kim is managing director of the Independent Directors Council.
Permalink: https://www.ici.org/viewpoints/21_view_aridc
TOPICS: Fund GovernanceIDC
A New Benchmark for Distribution Oversight
By Ahmed Elghazaly
July 21, 2020
On June 1, the fund industry achieved a milestone for global cooperation. In an industry-led agreement, fund distributors and fund managers of Undertakings for the Collective Investment in Transferable Securities (UCITS) and alternative investment funds (AIFs) joined together to issue a common protocol for distribution oversight.
TOPICS: EuropeFund GovernanceFund RegulationGlobalICI GlobalInternationalOperations and TechnologyShareholder
A New Chapter of Growth and Impact: IDC’s 2019 Annual Review
By Thomas Kim
February 18, 2020
In a letter in the Independent Directors Council's 2019 Annual Review, IDC Managing Director Thomas Kim discusses the beginning of his role as head of IDC....
Proxy Proposals Worth Supporting
By Matt Thornton
January 29, 2020
The SEC can save millions of dollars for registered fund shareholders, while maintaining investor protections, by reforming the fund proxy system. The system, which funds use to solicit votes from their shareholders, poses significant challenges and costs to funds and their investors. A new report by the Investment Company Institute points to concrete regulatory actions that would improve the efficiency and cost-effectiveness of the fund proxy system…
TOPICS: Fund GovernanceMutual FundProxy VotingShareholder
Celebrating 15 Years: Join IDC for a Special Fund Directors Conference in October
By Amy B. R. Lancellotta
September 24, 2019
IDC’s Fund Directors Conference is always an important event for the fund director community, but this year’s gathering will take on special meaning. On October 21–23 in Chicago, we’ll mark 15 years of supporting fund directors’ work on behalf of fund shareholders—by taking stock of how fund governance has evolved, surveying today’s industry and regulatory landscape, and contemplating the road ahead.
TOPICS: Fund GovernanceIDC
A Year of Advocacy: IDC’s 2018 Annual Review
Amy B. R. Lancellotta
January 31, 2019
IDC is well known for its education and outreach programs—and it’s not hard to see why. Year after year, they provide fund directors with opportunities to hone their craft and connect with one another, equipping them with the tools they need to thrive in their oversight role for the benefit of fund shareholders....
SEC Should Reject Complex, Costly “Pass-Through” Proxy Voting
By Paul Schott Stevens
October 2, 2018
Policymakers and regulators at the US Securities and Exchange Commission (SEC) have renewed their interest in proxy voting issues recently. Among the items under discussion at an upcoming SEC Roundtable is the idea that a fund would only be allowed to vote on portfolio company proxies after the fund asks its own shareholders how the fund should vote. In essence, this would “pass through” to fund shareholders the decision of how corporate proxies would be exercised. Even the briefest consideration demonstrates how misguided and impractical the idea is—and why it should go no further.
TOPICS: Fund GovernanceFund RegulationProxy VotingShareholder
Fund Adviser Proxy Votes Align with Fund Interests
By Paul Schott Stevens
September 24, 2018
A key assertion in “Cracking the Proxy Racket” (The Wall Street Journal's Review & Outlook, September 18) is that asset managers vote “in block” to support recommendations set forth by advisory firms like Glass Lewis and Institutional Shareholder Services. Such statements ought to be tested against actual data.
A decade’s worth of research shows that fund advisers vote proxies diligently, in line with their fiduciary duty to the fund and its shareholders...
TOPICS: Fund GovernanceFund RegulationIndex FundMutual FundProxy VotingShareholder
Education, Outreach, Advocacy: A Big 2017 for IDC and Fund Independent Directors
By Amy B. R. Lancellotta
February 8, 2018
The following appeared as the “Letter from the Managing Director” in IDC’s 2017 Annual Review.
If there has been a single constant across the 13-year history of the Independent Directors Council (IDC), it’s the stability of our four-part mission...
Independent Directors’ Stringent Oversight Contributes to Decline in Fund Fees
By Amy B. R. Lancellotta
January 9, 2018
The following ICI Viewpoints is a letter to the New York Times by Amy B. R. Lancellotta, managing director of the Independent Directors Council, in response to an article published on December 30, 2017.
TOPICS: Fund GovernanceFund RegulationMutual FundShareholder
A Way Forward on Modernizing Fund Director Responsibilities
By Amy B. R. Lancellotta
November 14, 2017
In recent years, the workload for boards of US regulated funds has grown heavier and more complex—owing in part to the fund industry’s growth and evolution, but due largely to a raft of new responsibilities established in Securities and Exchange Commission (SEC) rulemakings and other initiatives.
TOPICS: Fund GovernanceFund RegulationMutual Fund
Funds Actively Seek Companies’ Sound Management
By Paul Schott Stevens
July 3, 2017
The following ICI Viewpoints is a letter to the Wall Street Journal by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an editorial published on June 22, 2017.
In their muddled and inconsistent arguments, the authors of “Index Funds Are Great for Investors, Risky for Corporate Governance” (op-ed, June 22) rely on unfounded assertions while ignoring clear legal requirements placed on registered funds, their boards, and their advisers...
TOPICS: Exchange-Traded FundsFund GovernanceFund RegulationIndex FundMutual FundShareholder
Education, Outreach, Advocacy: A Big 2016 for IDC and Fund Independent Directors
By Amy B. R. Lancellotta
January 17, 2017
The Independent Directors Council (IDC) just wrapped up another year of vigorous support for the fund director community—educating directors, bringing them together to share ideas and experiences, and advocating on their behalf in policy debates. This brief post, adapted from IDC’s 2016 Annual Review, highlights some of IDC’s more notable work over the course of the year.
TOPICS: Fund GovernanceFund RegulationMutual Fund
It’s Time: SEC Proposals Show the Need to Reexamine the Role of Fund Boards
By Amy B. R. Lancellotta
July 7, 2016
The proper role for fund independent directors—the role where they are best-positioned to represent shareholder interests—is to oversee the work of fund management. The sharp distinction between directors’ oversight role and management’s on-the-ground, day-to-day responsibilities has been a major factor in the modern fund industry’s 75-plus years of success.
TOPICS: Fund GovernanceFund RegulationMutual Fund
Liquidity Risk Management Must Be Done Right
By Paul Schott Stevens
January 15, 2016
The following ICI Viewpoints is a lightly edited version of a letter that ICI President and CEO Paul Schott Stevens sent to U.S. Securities and Exchange Commission (SEC) Chair Mary Jo White, as part of the Institute’s overall response to the SEC’s liquidity risk management proposal.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
How the SEC’s Six-Bucket Approach Could Provide a False Picture of Liquidity
By Brian Reid
January 14, 2016
As I explained in a previous post, I filed a letter on January 13 with the U.S. Securities and Exchange Commission (SEC) in response to its liquidity risk management proposal and to Liquidity and Flows of U.S. Mutual Funds, a study by the Commission’s Division of Economic and Risk Analysis (DERA). My letter was one of four components of ICI’s multipart response to the SEC proposal.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
The SEC’s Liquidity Proposal: Good Goals, Unintended Consequences
By Brian Reid
January 13, 2016
On January 13, I filed a letter with the U.S. Securities and Exchange Commission (SEC), in response to the SEC’s liquidity risk management proposal and to Liquidity and Flows of U.S. Mutual Funds, a study by the SEC’s Division of Economic and Risk Analysis (DERA). My letter was one of four components of ICI’s multipart response to the SEC proposal.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
Mutual Fund Investments in Private Placements: an Overview
By Gregory M. Smith
November 23, 2015
Given recent media interest in mutual fund investments in private placements, it might be helpful to review mutual fund disclosure and valuation obligations. How do funds handle securities that are not publicly traded?
TOPICS: Bond FundEquity InvestingFund GovernanceFund RegulationInvestment EducationMutual FundOperations and TechnologyTrading
Changes to Money Market Funds Are Showing Up in Data
By Sean Collins
November 10, 2015
In July 2014, the Securities and Exchange Commission (SEC) adopted new regulations for money market funds.
TOPICS: Fund GovernanceFund RegulationMoney Market Funds
The Wall Street Journal’s Dangerous Disservice to Investors
By Mike McNamee
September 22, 2015
For 75 years, mutual funds have successfully met their regulatory obligation to fulfill redemption requests within seven days, meeting investor demands and delivering on their investment objectives through good markets and bad.
Yet the Wall Street Journal seems determined to ignore this established history and the circumstances surrounding it. It has created a liquidity “measure” of its own devising—a test that no regulator has endorsed and no informed market participant would credit. The newspaper uses its self-invented process to imply that bond mutual funds are “pushing the limits” of Securities and Exchange Commission (SEC) guidelines governing fund liquidity.
TOPICS: Bond FundBondsEquity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund GovernanceFund RegulationMutual Fund
How SIFI Designation Could Undermine Fund Governance: Parsing the Fed’s Proposal for GE Capital
By Paul Schott Stevens
June 16, 2015
Fund boards and independent directors have a long history of serving shareholder interests, yet today they face an alarming prospect that could threaten their ability to continue doing so.
TOPICS: Federal ReserveFinancial StabilityFund GovernanceFund RegulationMutual FundShareholderTreasury
Cybersecurity: Managing Risk in an Increasingly Connected World
By Todd Bernhardt
June 12, 2015
It’s increasingly obvious that we live in a world where cyber threats are evolving quickly and will remain persistent. But though such risks can never be eliminated, they can be managed, said panelists at ICI’s Operations and Technology Conference, held in conjunction with the Institute’s General Membership Meeting May 6–8 in Washington, DC.
TOPICS: CybersecurityEventsFund GovernanceGMMOperations and Technology
“Preemptive Runs” and Money Market Fund Gates and Fees: Theory Meets Practice
By Sean Collins and Chris Plantier
August 20, 2014
A recent post on the blog of the Federal Reserve Bank of New York discusses the possibility that new rules by the Securities and Exchange Commission (SEC) allowing money market funds to temporarily impose fees or gates during times of market instability could increase the risk of preemptive runs on such funds during times of stress, rather than helping to limit destabilizing withdrawals, as the SEC intended.
TOPICS: EuropeFederal ReserveFinancial StabilityFund GovernanceFund RegulationGovernment AffairsInternationalMoney Market FundsTreasury
Industry Leaders Reflect on Serving Investors in an Evolving World
By Christina Kilroy
June 4, 2014
Speaking on the Leadership Panel held Wednesday, May 21, at ICI’s General Membership Meeting (GMM), fund industry leaders agreed that challenges as well as opportunities abound for their businesses in today’s complex world.
TOPICS: 401(k)EventsFederal ReserveFinancial MarketsFinancial StabilityFund GovernanceFund RegulationGMMGovernment AffairsInvestment EducationMutual FundRetirement PolicyShareholder
SEC Chair White Stresses Need for FSOC to Consult Sources for Necessary Expertise
By Rachel McTague
May 22, 2014
Securities and Exchange Commission (SEC) Chair Mary Jo White today called for the U.S. Financial Stability Oversight Council (FSOC) to use outside expertise to the degree necessary in its process of designating systemically important financial institutions (SIFIs). She asserted that it is “enormously important for FSOC, before it makes any decision of any kind, to make sure it has the necessary expertise on any of those issues.”
TOPICS: EventsFederal ReserveFinancial MarketsFinancial StabilityFund GovernanceFund RegulationGMMGovernment AffairsMoney Market FundsMutual FundOperations and TechnologyShareholderTradingTreasury
Updated FICCA Framework Makes Auditing Omnibus Accounts Easier, More Efficient
By Kathy Joaquin
January 27, 2014
Many financial intermediaries—such as broker-dealers, financial advisers, and retirement plan recordkeepers—provide services to fund shareholders and maintain customer account information on their own recordkeeping systems. Fund sponsors, in turn, want to ensure that intermediaries are meeting their obligations in servicing fund shareholders, and so, have been seeking oversight tools that allow them to do this efficiently and effectively. ICI recently took steps to improve one of the critical oversight tools available to the industry, through a major update of the Financial Intermediary Controls and Compliance Assessment (FICCA) engagement framework.
TOPICS: Fund GovernanceFund RegulationMutual FundOperations and Technology
IDC Paper Assists Boards in Oversight of ETFs
By Annette Capretta
October 19, 2012
The Independent Directors Council (IDC) has issued a new paper, Board Oversight of Exchange-Traded Funds in order to assist directors of exchange-traded funds (ETFs) in performing their oversight responsibilities. The demand for ETFs has grown markedly as investors—both institutional and retail—increasingly turn to ETFs as investment options in their portfolios. With the increase in demand, sponsors have offered more ETFs with a greater variety of investment objectives. Our paper also may be useful for directors who do not currently oversee ETFs but wish to be more familiar with a board’s oversight role, including those whose fund groups may currently invest in ETFs or intend to launch ETFs in the future.
Yes, Your Fund’s Board Is Watching Out for You
Amy Lancellotta
June 12, 2012
A recent Wall Street Journal headline posed the question, “Is Your Fund’s Board Watching Out for You?” (June 10, 2012).
TOPICS: Fund Governance
MarketWatch Misunderstands Important Role of Mutual Fund Directors
By Amy Lancellotta
May 15, 2012
Shareholders deserve better than a recent MarketWatch column’s clear misunderstanding of a mutual fund director’s work. To correct just a few points:
TOPICS: Fund Governance
Independent Directors and Trustees Deeply Concerned About More Changes to Money Market Funds
By Amy Lancellotta
May 9, 2012
As the SEC continues to consider flawed proposals that would have far-reaching consequences for money market funds, two groups representing mutual fund independent directors and trustees released a joint statement registering their deep concerns about any further changes to the regulation of these funds.
Funds' Board Structures Promote Efficiencies and Cost Savings for Shareholders
By Amy Lancellotta
December 5, 2011
Reporters, academics, and others who are unfamiliar with investment companies sometimes question the unusual structure of fund boards. Unlike operating companies—where each company as a rule is overseen by its own board—multiple funds in a complex typically share common boards. In Overview of Fund Governance Practices, 1994-2010, we found that 83 percent of fund complexes use a “unitary board” (one board for all their funds), while 17 percent use “cluster boards” (two or more boards, each overseeing a group of funds within the complex).
TOPICS: Fund Governance
ICI and IDC Oppose SEC’s One-Size-Fits-All Approach to Proxy Access
By ICI Viewpoints
December 8, 2010
TOPICS: Fund Governance
SEC Considerably Understates Costs of Rule 12b-1 Reform Proposal
By ICI Viewpoints
December 1, 2010
Following up on our November comment letter to the Securities Exchange Commission, ICI conducted and submitted our own cost-benefit analysis of the SEC’s proposal to replace Rule 12b-1.
TOPICS: Fund GovernanceFund Regulation
ICI Research Shows How Funds Have Addressed Changing Mix of Proxy Proposals
By ICI Viewpoints
November 10, 2010
New ICI research on trends in proxy voting by mutual funds finds that the 2007–2009 financial crisis altered the mix of proxy proposals funds voted on. Our economists’ examined more than 10 million fund votes cast during this period.
TOPICS: Fund Governance
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