A Year of Advocacy: IDC’s 2018 Annual Review

Amy B. R. Lancellotta

January 31, 2019

The following appeared as the “Letter from the Managing Director” in IDC’s 2018 Annual Review.

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.

Our advocacy work might be less visible, but it’s no less important. That held especially true in 2018, when a highly productive SEC issued numerous requests for comment, regulatory proposals, and rule amendments affecting the registered fund industry. Where the debates on these initiatives called for the perspective of fund directors, IDC responded with informed commentary and constructive recommendations.

One takeaway from our recent work with the SEC and staff is a marked shift in how they think about fund boards. For years, new tasks piled up with what sometimes felt like little thought about whether they would help directors serve shareholders. Now, the Commission and staff appear to be thinking more deeply about this—and establishing that a task would indeed be a valuable use of directors’ oversight before imposing it on them.

This shift is showing in the SEC’s regulatory work. In 2016, for example, the SEC revised its proposed liquidity risk management rule, seeking to ensure that no responsibilities assigned to boards fell outside their conventional oversight role. And in 2018, the Commission chose not to require boards to take on new responsibilities as a condition for fund sponsors to rely on its proposed ETF rule—rightly noting that an ETF’s compliance program and board oversight of the program is enough to ensure compliance with the ETF’s policies and procedures governing custom baskets.

We saw even more evidence at our 2018 Fund Directors Conference—where Dalia Blass, the director of the SEC’s Division of Investment Management, outlined a framework for the division to follow when it considers recommending board involvement as part of a new rulemaking and when it reevaluates existing board responsibilities.

This framework is a major development. Derived from what the division has learned through its board outreach initiative, the framework consists of factors to consider, including the policy goal of involving boards in a regulatory action, the level of involvement a board should have, and consistency with boards’ oversight role. The division’s recent no-action letter on board oversight of certain affiliated transactions reflects the principles of the framework.

Credit the SEC and staff for their commitment to modernizing the responsibilities imposed on fund boards. IDC has long engaged in dialogue with them about how best to tackle this enormous undertaking, and I’m pleased that we’re beginning to see the fruits of our labor.

The fund director community can feel good about the progress we’ve seen here—and the regulatory outlook for the near term. Still, as those who’ve served on fund boards long enough know, outlooks are by no means guarantees—so IDC will be working hard to build on this progress in 2019. Thanks to the enduring support of directors throughout the country, I have every confidence we’ll be able to do just that.

Amy B. R. Lancellotta is the managing director of the Independent Directors Council.

Permalink: https://www.ici.org/viewpoints/view_19_idc_18_annual_review

TOPICS: Fund Governance Fund Regulation IDC

ICI’s 2018 Annual Report: Letter from the President

By Paul Schott Stevens

December 3, 2018

A version of this letter by ICI President and CEO Paul Schott Stevens was released in the Institute’s 2018 Annual Report.

Fund industry watchers will remember this year as one of important policy developments, including some that have been the subject of years of debate. The Investment Company Institute has been deeply engaged in this wide range of issues, working on both legislative and regulatory fronts to promote advantageous outcomes for regulated funds and their shareholders....

Common Ownership: ‘Puffery’ in the Legal Analysis

By Mike McNamee

December 3, 2018

Proponents of the common ownership hypothesis presume that the economic debate over the competitive effects of institutional investing is settled. But a new paper from Douglas H. Ginsburg, judge on the US Circuit Court of Appeals for the District of Columbia Circuit, and Keith Klovers, a judicial clerk on that court, finds that those proponents "substantially overstate the validity and strength of the existing empirical work" on common ownership....

Common Ownership: Ignoring the Age-Old Conflict Between Owners and Managers

By Mike McNamee

November 30, 2018

In his first public remarks as a member of the Federal Trade Commission, Commissioner Noah Joshua Phillips tackled what he called “the common ownership story”—and concluded that “this ‘economic blockbuster’ seems a little light on plot.” And like many other experts, Commissioner Phillips sees problems with both the empirical evidence and the theoretical basis for the claim of anticompetitive harm....

Common Ownership: Faulty Assumptions on Investors’ ‘Economic Interests’

By Mike McNamee

November 29, 2018

In a new paper, scholars Thomas A. Lambert and Michael E. Sykuta find that proponents of the common ownership hypothesis don’t understand—or even attempt to consider—the actual economic interests and incentives of asset managers and their fund clients....

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.

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...

“Common Ownership” Hypothesis Is Unconvincing

By Sean Collins and Susan M. Olson

August 22, 2018

Economists and legal scholars have issued pointed critiques and empirical rebuttals of the “common ownership” hypothesis—the notion that institutional investors holding small, non-controlling stakes in competing companies in concentrated industries decrease competition and raise consumer prices. Yet the issue continues to draw attention and is one of a long list of topics that the Federal Trade Commission (FTC) will include in upcoming hearings on competition and consumer protection.

In response, the Investment Company Institute (ICI) has submitted a comment letter to the FTC to provide a factual baseline on key elements of the discussion to help dispel misrepresentations underlying the common ownership hypothesis.

SEC Commissioner Michael Piwowar: A Commitment to Markets, Shareholders...and Facts

By Rachel McTague

May 24, 2018

SEC Commissioner Michael Piwowar responded with candor to questions posed by ICI President and CEO Paul Schott Stevens during a lively discussion at the final day of ICI’s General Membership Meeting. Piwowar’s announced July 7 departure from the agency offered the outspoken commissioner the opportunity to reflect on fund regulation during his five-year tenure....

2018 Investment Company Fact Book: Letter from the Chief Economist

By Sean Collins

May 15, 2018

Those of us who wear glasses know that one of the most crucial elements in seeing the world is the right lens. A bad lens warps the light and distorts the signals; the right lens sharpens the image and enhances our understanding.

This is a useful metaphor for the work that ICI Research does in providing informed analysis to guide public policy. Through our voluminous collections and surveys, we gather large amounts of data—signals about the behavior of funds, markets, and investors. But finding the patterns in these signals requires the right lens—accumulated knowledge provided by context, economic insights, and understanding of institutions.

The Investment Company Fact Book is one very visible result of this process and its many elements...

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...

States Are Abusing Abandoned-Property Funds to Plug Budget Shortfalls

By Tamara K. Salmon

January 11, 2018

Imagine finding out that your investment account has been turned over to your state because it was considered “abandoned.” Imagine, too, that after the account was turned over to the state, the account received a capital gains distribution. As a result, you are liable for paying the taxes on that distribution—and can be assessed monetary penalties for not paying the taxes in a timely fashion.

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.

More People Are Building Nest Eggs with Their IRAs

By Sarah Holden

December 20, 2017

Individual retirement account (IRA) owners are good stewards of their money. They take a thoughtful approach to preparing for retirement by taking advantage of the dual role of IRAs and by researching important investment decisions, according to recent research from ICI. These are among the findings from “The Role of IRAs in US Households’ Saving for Retirement, 2017,” which details ICI’s research on IRA-owning households.

Congress Must Spike “FIFO” for All Investors

By Paul Schott Stevens

December 8, 2017

As the House and Senate reconcile their differing versions of tax reform, one provision from the Senate’s bill should be deleted immediately. Tax reform must not impose an accounting system known as “first-in, first-out” (FIFO) that would deprive America’s investors of their long-standing ability to manage their finances for the greatest tax efficiency.

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.

2017 Annual Report to Members: A Message from the Chairman

By William F. “Ted” Truscott

November 13, 2017

This letter by ICI Chairman Ted Truscott was released in our 2017 Annual Report to Members.

Every day, I’m reminded that each of us in the fund industry is driven to deliver ever-greater value for our fees and keep improving service to fund shareholders. Investors are demanding more from every asset manager—and the resulting competition drives us to innovate, find new efficiencies, and offer even better solutions for investors’ needs.

Let’s Make Disclosure Reform Serve Shareholders

By Dorothy Donohue

October 25, 2017

The October 12 meeting of the Investor Advisory Committee (IAC)—a group established by the Dodd-Frank Act to advise the Securities and Exchange Commission (SEC) on regulatory priorities and other issues—has breathed new life into a long-running debate over how US-registered funds can best provide essential information to their shareholders.

Applying Evidence to Theories on Regulated Funds

By Sean Collins

October 12, 2017

Late last month, the Financial Stability Oversight Council (FSOC) voted to rescind its designation of American International Group (AIG). After requiring a bailout during the financial crisis, the insurer was designated as a non-bank “systemically important financial institution,” or SIFI, in 2013. When FSOC conducted its most recent annual review, it decided AIG no longer warranted “systemic” status.

Cybersecurity at Work: To Confront Evolving Threats, Flexibility Is Key

By Peter Salmon

October 3, 2017

In the previous installment of this series, I examined a few ways to think about the cyberthreats facing us, and thus to guard against them more effectively. Now, with organizations in every sector of the US economy facing increased pressure to safeguard corporate and client data or suffer potentially ruinous damage to their operations and reputation, it seems that some regulators think they should dictate what’s best for all of us, regardless of individual firm circumstances.

Simulating a Crisis

By Sean Collins

August 15, 2017

The Bank of England (BoE) recently published a paper detailing results from a simulation intended to “stress-test” open-end investment funds. The paper suggests that under “severe but plausible” assumptions, investors could redeem so heavily from open-end investment funds (e.g., mutual funds or UCITS funds) during a period of market stress that they could cause “dislocations” in corporate bond markets.

New ICI Paper Helps Readers Understand ETF Listing Processes and Standards

By Jane Heinrichs and Kenneth Fang

August 10, 2017

Exchange-traded funds (ETFs) have been a part of US markets for more than 20 years, and they remain some of the most highly regulated financial products, subject to multiple and sometimes overlapping statutory schemes.

DOL Fiduciary Rule Review Is Opportunity for SEC

By Paul Schott Stevens

August 8, 2017

The following ICI Viewpoints is an op-ed by Paul Schott Stevens that was published in InvestmentNews on August 7, 2017.

Securities and Exchange Commission (SEC) Chairman Jay Clayton deserves credit for his decisive action inviting public feedback on the standards of conduct for financial advisers to retail investors. He now has a critical window of opportunity to press forward and work with the Department of Labor (DOL) to establish a consistent best-interest standard of conduct that applies uniformly across retirement and non-retirement accounts, while preserving investor choice.

Americans Trust in Their 401(k) Plans

By Sarah Holden

July 7, 2017

Defined contribution (DC) plans have long been a key component of Americans’ retirement savings. And with more than $5 trillion in assets and about 54 million active participants, 401(k) plans are the most common type.

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...

Industry Leaders Highlight Opportunities Presented by Industry Change

By Miriam Bridges

June 1, 2017

Shifts in demographics, regulation, investor preferences, and new product offerings are creating a range of opportunities for the asset management industry. In conversations exploring these evolving trends, industry leaders offered their perspectives on how to succeed in these new environments during two insightful sessions on the second day of ICI’s 59th General Membership Meeting, held May 3–5 in Washington, DC.

A Tech-Enabled Future—and Present—for Investment Advice

By Rob Elson

May 30, 2017

The future of investment advice will lie at the intersection of technology and humanity, said panelists at ICI’s 2017 General Membership Meeting. But those panelists—Eli Broverman, cofounder of Betterment; Kelly Coffey, CEO at JP Morgan’s US Private Bank; and Ben Huneke, head of investment solutions at Morgan Stanley Wealth Management—offered differing views on how much of a role people will play.

Stevens Calls for Measures to Enhance Economic Growth

By Rachel McTague

May 5, 2017

With America striving to achieve greater economic growth, Paul Schott Stevens, ICI president and CEO, called on the Securities and Exchange Commission (SEC) to enhance funds’ essential role in the capital markets by proposing new rules to govern funds’ use of derivatives and by creating a harmonized best-interest standard for advisers providing investment advice to retail and retirement investors. The ICI chief also urged the SEC to adopt a fund disclosure regime for the 21st century.

2017 Investment Company Fact Book: Letter from the Chief Economist

By Brian Reid

April 27, 2017

Have you ever tried to put a jigsaw puzzle together without knowing what the finished work should look like? It’s difficult—even with help from family and friends. Are those blue pieces part of a peaceful lake or a cloudless sky? Are those dark pieces a forest floor or storm clouds brewing on the horizon? Without the completed picture on the puzzle box as a guide, everyone has their own idea of what the completed work will look like and how to put it together.

What's the “Exposure” of Money Market Funds to Europe?

By Sean Collins

January 26, 2017

At the American Economic Association (AEA) meetings in Chicago early this month, speakers and attendees at several sessions asked: do money market funds pose systemic risks?

Mutual Funds and ETFs’ Share of the Corporate Bond Market: What’s the Right Answer?

By Shelly Antoniewicz

January 19, 2017

Participation by mutual funds and exchange-traded funds (ETFs) in US corporate bond markets was a topic of discussion during several sessions held at the American Economic Association Meetings in Chicago earlier this month. Panelists and presenters alike cited “statistics” on the share of corporate bonds held by funds. The funny thing was, they all cited different numbers, running the gamut from 18 to 35 percent.

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.

A Proposal that Should Be Popped

By Paul Schott Stevens

December 15, 2016

The following ICI Viewpoints is a letter to the editor by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an op-ed published on December 7, 2016, in the New York Times, “A Monopoly Donald Trump Can Pop.”

Millions of Americans could lose the low costs and broad diversification of fund investing under the dangerous proposal outlined in the op-ed by Posner, Weyl, and Morton.

The Taper Tantrum—Take II

By Shelly Antoniewicz

December 13, 2016

Long-term interest rates in the United States have been on the rise since summer 2016—slowly creeping up from July through October, and then jumping after the presidential election. Thus far, the response from bond mutual fund investors has been subdued. Nevertheless, various commentators—from the vice chairman of the Federal Reserve Board to the multinational Financial Stability Board—have expressed concerns that bond fund investors may rush to redeem shares to avoid portfolio losses stemming from unexpected increases in interest rates.

Investor Protection Priorities for the New Year

By David Blass

December 12, 2016

The following ICI Viewpoints is adapted from a presentation that ICI General Counsel David Blass gave to the Investor Advisory Committee of the US Securities and Exchange Commission on December 8, 2016. Visit this page to read the entire presentation.

If I were to poll ICI members about next year’s priorities, I am sure we would receive consistent feedback: give us an opportunity to implement all the rules that have been imposed on us. New rules from the Securities and Exchange Commission (SEC) covering data reporting, swing pricing, and liquidity risk management will require huge expenditures and years of work to implement fully. And they were adopted in the aftermath of two rounds of money market fund reform, as well as many other rules applicable to the fund industry adopted by other regulatory agencies.

Fund Fees Have Been Falling for Two Decades

By Paul Schott Stevens

October 19, 2016

The following ICI Viewpoints is a letter to the editor by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an editorial published on October 9, 2016, in InvestmentNews, “DOL fiduciary rule may finally spark lower fund fees for mutual funds.” It appeared in the print edition of the publication on October 17, 2016.

Money Market Fund Reforms Combine with Bank Regulations to Boost Interest Rates

By Sean Collins

September 28, 2016

As detailed in the previous ICI Viewpoints in this series, the Securities and Exchange Commission’s (SEC) new rules for money market funds induced a drop in the assets of prime and tax-exempt money market funds of $910 billion since January 2015 and a roughly comparable $872 billion rise in the assets of government money market funds.

As Money Market Fund Investors Adjust, Funds Have Managed Flows

By Sean Collins

September 27, 2016

The Securities and Exchange Commission’s new rules for money market funds, which must be fully implemented by October 14, largely center around two key reforms.

For Money Market Funds, Massive Preparation Has Paid Off in Smooth Transition

By Marty Burns

September 26, 2016

First in a series on money market funds.

By October 14, the money market fund industry must fully implement the 2014 money market fund reforms passed by the Securities and Exchange Commission (SEC), cementing major changes for investors and fund complexes. ICI has been in close constant contact with members since the rules were enacted in 2014 and has been working with operations and other professionals throughout the industry to ensure an orderly transition—including fully informing investors—to the new regime in October.

Revised Fed Data Show Mutual Funds’ Share of Corporate Bond Market Is Small and Stable

By Shelly Antoniewicz

August 26, 2016

Discussions among regulators and the financial press about the role of bond mutual funds in financial stability risks have been fueled by concerns about the size and apparent growth in bond funds’ participation in corporate bond markets. But what if that role and its growth have been largely overstated?

Matching Models to Reality: Doomsayers Are Disappointed—Again—as Funds Weather Brexit Shock

By Paul Schott Stevens

July 13, 2016

On Thursday, June 23, the electorate of the United Kingdom voted in a referendum on the country’s membership in the European Union. The result—51.9 percent in favor of “Brexit,” 48.1 percent in favor of “Remain”—went against pollsters’ and pundits’ expectations and surprised the world.

Building on the Success of the Private-Sector Retirement System Is the Real “Secure Choice”

By David Blass

July 8, 2016

Retirement assets in the United States totaled $24 trillion at the end of 2015, bolstered by investments through employer-sponsored plans and individual retirement accounts (IRAs).

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.

When Investor Protection Becomes Protectionism

By Patrice Bergé-Vincent

June 14, 2016

Today, Europe is facing two related needs: to provide its citizens with efficient, lower-cost vehicles for savings and investment, and to bolster economic growth.

Industry Leaders Address Changing Industry Terrain

By Miriam Bridges

June 3, 2016

Will fund industry leaders need to rethink their traditional operating models? Experts shared their views on this question and others, as well as the opportunities presented by a rapidly changing industry, in a candid discussion on the second day of ICI’s 58th General Membership Meeting, held May 18–20 in Washington, DC.

The SEC’s Historic Success: Six Key Ingredients

By Paul Schott Stevens

May 20, 2016

This ICI Viewpoints is adapted from ICI President and CEO Paul Schott Stevens’s introduction for SEC Chair Mary Jo White at the 2016 ICI General Membership Meeting on May 20.

More than 80 years have passed since Congress—looking to restore public confidence in markets at the height of the Great Depression—established the U.S. Securities and Exchange Commission (SEC) to administer the federal securities laws enacted as part of President Franklin D. Roosevelt’s New Deal.

SEC Chair White Expects Continued ‘Bright Spotlight’ on Asset Management

By Rachel McTague

May 20, 2016

The U.S. Securities and Exchange Commission (SEC) is contemplating several new initiatives governing registered funds, in addition to adopting rules this year on reporting modernization, liquidity management, and the use of derivatives, SEC Chair Mary Jo White announced at the opening session on the final day of ICI’s annual General Membership Meeting (GMM).

To the SEC and FINRA: It’s Your Move

By David W. Blass

April 21, 2016

Earlier this month, I wrote about the wide-ranging benefits of the proposed Securities and Exchange Commission (SEC) rule to give U.S. regulated funds the option of making online access to shareholder reports their default method for informing their shareholders.

The SEC’s Online-Delivery Gift to Fund Shareholders

By David W. Blass

April 4, 2016

A recent SEC rulemaking proposal presages good news for America’s 90 million mutual fund shareholders. Proposed Rule 30e-3 under the Investment Company Act of 1940, introduced last year as part of a larger initiative to enhance and modernize fund data reporting, would give funds the option of flipping their default mechanism for delivering shareholder reports from U.S. mail to online access.

Yes, Funds Come and Go—Without Government Help

By Todd Bernhardt

March 11, 2016

For several years now, ICI has pushed back against those advocating for bank-like regulations on the asset management industry, pointing out the numerous reasons why regulated funds or their managers are not sources of risk to the overall financial system.

MetLife Case Shows That “Assuming the Worst of the Worst of the Worst” Doesn’t Work

By Mike McNamee

February 24, 2016

If regulators are going to impose strict rules and heavy burdens on a business, should they have to demonstrate that those rules and burdens address an actual and probable risk?

Derivatives—Please Don’t Let Them Be Misunderstood

By Shelly Antoniewicz

February 22, 2016

Derivatives are important portfolio management tools that provide funds with many potential benefits, including the ability to:

hedge risk;
enhance liquidity, because derivatives can be more liquid than traditional physical securities;
gain or reduce exposure to unique markets or to asset classes when access through other instruments is difficult, costly, or impossible;
manage or equitize cash; and
reduce cost.

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.

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.

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.

The First Move: MSRB Issues a Proposal for Shortened Settlement Cycle

By Marty Burns

December 8, 2015

Recently, the Municipal Securities Rulemaking Board (MSRB) opened the door on the regulatory filings needed to move the U.S. securities markets to a shortened settlement cycle.

Traders, Start Your Engines: After August 24, Exchanges Need to Coordinate

By Jennifer Choi and George Gilbert

November 30, 2015

The extraordinary volatility in U.S. equity markets on August 24, 2015, exposed a significant deficiency in the rules governing these markets’ structure: a lack of harmonization across securities exchanges for reopening trading after a “limit up–limit down” trading halt in a security.

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?

U.S. Bond ETFs Resilient on August 24

By Shelly Antoniewicz

November 20, 2015

Some observers have suggested that equity market volatility on August 24, 2015, spilled over into other markets and products, in particular to bond exchange-traded funds (see, for example, Bank of England Financial Stability Paper, no. 34, October 2015, pages 26 and 27). In our analysis of the events of that morning, we conclude that U.S. bond ETFs were resilient and largely immune to the turmoil in the equity markets.

Retirement Planning: No Place for Fairy Tales

By Paul Schott Stevens

November 17, 2015

It is sadly appropriate that Labor Secretary Thomas Perez invokes fairy tales in his Nov. 16 commentary, “A path forward for state retirement plans.” Neither his version of the past nor his program for the future accord with reality.

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.

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.

Ignore the IMF’s Uninformed Call for a Third Round of Reforms to U.S. Money Market Funds

By Jane Heinrichs and Chris Plantier

July 23, 2015

A year ago today, the U.S. Securities and Exchange Commission (SEC) voted to adopt sweeping reforms to its rule governing money market funds.

The IMF on Asset Management: Handle Empirical Results with Care

By Chris Plantier

July 15, 2015

In this ICI Viewpoints series, we’ve examined the wide range of data errors, inconsistencies, results that don’t bear statistical scrutiny, and misinterpretations in the International Monetary Fund’s most recent Global Financial Stability Report (GFSR)—specifically, the chapter on “The Asset Management Industry and Financial Stability.” Those problems primarily involved poor understanding of funds and their investors. We didn’t need advanced statistical methods to uncover them.

ICI Welcomes IOSCO’S Call to Focus on Products and Activities in Asset Management

By Paul Schott Stevens

June 17, 2015

ICI President and CEO Paul Schott Stevens today issued the following statement in response to the communiqué released today by the Board of the International Organization of Securities Commissions (IOSCO)

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.

The IMF on Asset Management: Sorting the Retail and Institutional Investor “Herds”

By Sean Collins

June 4, 2015

Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.

In this ICI Viewpoints series, we’re examining the wide range of data errors, inconsistencies, results that don’t bear statistical scrutiny, and misinterpretations in the International Monetary Fund’s April 2015 Global Financial Stability Report (GFSR)—specifically, the chapter on “The Asset Management Industry and Financial Stability.” These problems undercut the IMF’s conclusion that “Even simple investment funds such as mutual funds can pose financial stability risks.”

The IMF on Asset Management: Which Herd to Follow?

By Sean Collins

June 1, 2015

Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.

In April 2015, the International Monetary Fund (IMF) published its most recent Global Financial Stability Report (GFSR), which included a chapter titled, “The Asset Management Industry and Financial Stability.”

We have heard suggestions from more than one observer that the IMF’s GFSR Chapter on asset management provides a wealth of charts, tables, and data to support regulators’ case that regulated funds or asset managers could pose systemic risks.

Fresh Perspectives on a Changing World

By Miriam Bridges

May 29, 2015

Implications of globalization, the impact of the Millennial Generation on product development, the search for alpha in a world full of passive products—these were among the top priorities and concerns of the fund industry discussed by a panel of industry leaders at ICI’s 57th annual General Membership Meeting (GMM), held May 6–8 in Washington, DC.

The IMF on Asset Management: The Perils of Inexperience

By Sean Collins

May 28, 2015

Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.

In April, the International Monetary Fund (IMF) released its most recent Global Financial Stability Report (GFSR), including a chapter on “The Asset Management Industry and Financial Stability.”

SEC Chair White Affirms Agency Has Tools to Address Risks in Industry

By Rachel McTague

May 8, 2015

The U.S. Securities and Exchange Commission (SEC) has the tools it needs to address systemic risks to the extent they exist in the asset management industry, said SEC Chair Mary Jo White at the opening session on the final day of ICI’s annual General Membership Meeting (GMM). White also announced that David Grim—who had been serving as acting director of the SEC’s Division of Investment Management—has just been named director of the division. White said she is thrilled that Grim, a 20-year veteran of the SEC in the investment management area, is taking the reins at a time when the Commission is moving forward to implement proactive regulations for the industry.

Opinion: The Tax Threat to Your Mutual Fund

By Mike McNamee

May 7, 2015

Vanguard Chairman and CEO Bill McNabb sent “an open letter to all mutual fund investors” in the opinion pages of Thursday’s Wall Street Journal. His message: fund investors face a clear threat of higher costs, weaker returns, and a bailout tax to salvage other failing financial institutions—all if regulators get their way in imposing new rules on funds or their managers.

GMM Policy Forum: “It Always Comes Down to Trust”

By Todd Bernhardt

May 6, 2015

Over the 75-year history of the modern mutual fund industry, funds have helped to democratize investing, providing a tremendous array of investing options at a reasonable cost for millions of people. And given rapid advances in technology and the efficiencies that they can bring, the future looks even brighter, said Walter W. Bettinger II at the opening session of ICI’s 57th General Membership Meeting (GMM).

2015 Investment Company Fact Book: Letter from the Chief Economist

By Brian Reid

May 4, 2015

A version of this letter by ICI Chief Economist Brian Reid was released today in our 55th edition of the Investment Company Fact Book.

This year marks the 75th anniversary of the Investment Company Act and the Investment Advisers Act—the key statutes under which mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts are regulated and governed. In 1940—the same year that Congress enacted these laws—the fund industry formed the National Committee of Investment Companies, the trade group that became the Investment Company Institute (ICI).

The IMF Quietly Changes Its Data, but Not Its Views

By Chris Plantier

April 21, 2015

On Friday, April 10, we pointed out that the International Monetary Fund (IMF) apparently had vastly overstated the size and growth of bond fund holdings of emerging market bonds in its latest Global Financial Stability Report (GFSR).

Federal Reserve Reverse Repo Facility Helps Stabilize Short-Term Money Markets

By Chris Plantier

April 17, 2015

Following a pattern observed at the end of recent quarters, money market fund holdings of European issuers dropped at the end of March, although the decline was not as large as the previous quarter, ending December 2014. As we have noted before, for regulatory reasons European banks have been paring their balance sheets at the end of each quarter, resulting in a temporary decline in their desire to borrow from money market funds.

The IMF Is Entitled to Its Opinion, but Not to Its Own Facts

By Sean Collins and Chris Plantier

April 10, 2015

On Wednesday, the International Monetary Fund released its latest Global Financial Stability Report (GFSR), including a chapter on the asset management industry and financial stability.

On Fiduciary Rule, New York Times Relies on Fatally Flawed Research

By Paul Schott Stevens

April 8, 2015

Today I submitted the following letter to the editor of the New York Times:

Designation’s Vast Reach into Investor Portfolios

By Paul Schott Stevens

March 24, 2015

On Wednesday, March 25, I’ll testify before the Senate Committee on Banking, Housing, and Urban Affairs about the Financial Stability Oversight Council’s process for designating nonbank firms as “systemically important financial institutions,” or SIFIs.

The IMF Makes All of OFR’s Mistakes—And More

By Sean Collins and Chris Plantier

October 10, 2014

The International Monetary Fund (IMF) just released its latest Global Financial Stability Report. In the immortal words of Yogi Berra, it is déjà vu all over again.

The IMF report bears more than a passing resemblance to Asset Management and Financial Stability, published by the U.S. Treasury Department’s Office of Financial Research (OFR) in September 2013. The OFR report was met with widespread criticism for its misinformed discussion of hypothetical “vulnerabilities” posed by mutual funds and other asset managers.

Bloomberg Ignores the Evidence on Bond ETFs

By Mike McNamee

September 26, 2014

In response to “Pimco ETF Probe Spotlighting $270 Billion Market Vexing FSB,” we posted the following comment on Bloomberg News’ website:

Why Regulated Funds Are a Relatively Stable Source of Foreign Investment for Emerging Economies

By Chris Plantier

September 26, 2014

The press and policymakers focus a great deal of attention on flows to U.S. and European regulated mutual funds and exchange-traded funds (ETFs), in part because these funds are perhaps the most easily observed and readily measured players in capital markets.

Securities Lending by Mutual Funds, ETFs, and Closed-End Funds: Are the Risks Systemic?

By Bob Grohowski

September 18, 2014

The Financial Stability Oversight Council (FSOC), the U.S. Treasury’s Office of Financial Research (OFR), and the Financial Stability Board (FSB) are charged with identifying systemic risks.

Securities Lending by Mutual Funds, ETFs, and Closed-End Funds: Regulators’ Concerns

By Bob Grohowski

September 17, 2014

This post is the third in a series that focuses on securities lending by U.S. regulated funds—mutual funds, exchange traded funds (ETFs), and closed-end funds that are registered under the Investment Company Act of 1940.

Securities Lending by Mutual Funds, ETFs, and Closed-End Funds: The Market

By Bob Grohowski and Sean Collins

September 16, 2014

As the potential risks of securities lending are discussed and debated by the Financial Stability Oversight Council (FSOC), the U.S. Treasury’s Office of Financial Research (OFR), and the Financial Stability Board (FSB), it is important to try to understand both the overall size of the securities lending market and the share of it attributable to different participants.

Securities Lending by Mutual Funds, ETFs, and Closed-End Funds: The Basics

By Bob Grohowski

September 15, 2014

The Financial Stability Oversight Council (FSOC) recently announced that it has directed its staff to “undertake a more focused analysis of industry-wide products and activities to assess potential risks associated with the asset management industry.”

“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.

Sizing Up Mutual Fund and ETF Investment in Emerging Markets

By Chris Plantier

August 18, 2014

In coming decades, emerging market (EM) economies will need substantial new capital to accompany and sustain their rapid growth.

Living Wills and an Orderly Resolution Mechanism? A Poor Fit for Mutual Funds and Their Managers

By Frances Stadler and Rachel Graham

August 12, 2014

During the global financial crisis, the distress or disorderly failure of some large, complex, highly leveraged financial institutions (banks, insurance companies, and investment banks) required direct intervention by governments—including a number of bailouts—to stem the damage and prevent it from spreading. One focus of postcrisis reform efforts has been to ensure that regulators are better equipped to “resolve” a failing institution in a way that minimizes risks to the broader financial system, as well as costs to taxpayers. The new tools provided under the Dodd-Frank Act include requirements for the largest bank holding companies and nonbank systemically important financial institutions (SIFIs) to prepare comprehensive resolution plans in advance (known as “living wills”), and creation of a new “orderly resolution” mechanism for financial institutions whose default could threaten financial stability.

Across the Universe: Seeing the Whole Picture in the Systemic Risk Debate

By Paul Schott Stevens

July 30, 2014

Astrophysicists have discovered that they can’t account for the composition and behavior of the universe without including “dark matter”—matter that can’t be observed directly.

The Real Lessons to Be Learned from 1994’s Bond Market

By Brian Reid

July 29, 2014

A recent “Heard on the Street” column in the Wall Street Journal (“Heeding 1994's Bond-Market Lesson,” July 27, 2014) is correct in saying that there’s a lesson to be learned from the 1994 bond market—but it draws the wrong lesson.

“The Age of Asset Management”—Less Risk, Not More

By Brian Reid

July 24, 2014

The following was written by ICI’s chief economist, Brian Reid, and published on FT Alphaville on July 23. For more information on ICI’s views and research on financial stability, please visit our Financial Stability Resource Center.

European Banks Significantly Reduced Borrowing from U.S. Money Market Funds in June

By Chris Plantier

July 18, 2014

As we discussed in March and April, European banks have generally become less willing to borrow from U.S. money market funds due to regulatory pressures, especially at the end of the quarter. Specifically, the new Basel III requirements seek to increase capital ratios of banks and explicitly limit how much banks fund their operations through short-term borrowing (which includes short-term securities banks issue that money market funds invest in). This quarter-end effect was particularly strong at the end of June as European bank regulators continued to monitor bank progress toward meeting the new Basel III requirements, which will be fully phased in over the next few years.

Now Off the Hill, Senator Snowe Still Brimming with Ideas, Advice

By Rob Elson

June 5, 2014

U.S. policy is ripe for reform in a number of key areas, but changes to ease the polarized political environment must come first, former U.S. senator Olympia Snowe (R-ME) told the crowd during the final session of ICI’s 56th annual General Membership Meeting (GMM), held May 20–22 in Washington, DC.

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.

Former ICI President Matt Fink Decries FSOC’s “Revisionist History”

By Mike McNamee

May 30, 2014

Arguments that large stock and bond mutual funds are prone to “runs” that can destabilize markets go back many decades, and are as misguided now as they were then, argues Matt Fink, ICI president from 1991 to 2004, and author of The Rise of Mutual Funds: An Insider's View.

Errors of the Times: Getting the FSOC Debate All Wrong

By Mike McNamee

May 23, 2014

New York Times columnist Floyd Norris makes a number of fundamental errors in his Friday column about the House Financial Services Committee hearing and the broader debate about the Financial Stability Oversight Council (FSOC) and its review of asset management.

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.”

Headlining ICI’s GMM, Blair Talks of Tough Challenges, Vast Opportunities

By Rob Elson

May 21, 2014

Challenges abound in our increasingly global world, said Tony Blair, former prime minister of the United Kingdom. Yet our future could be brighter than ever, he insisted.

Blair’s stirring words came during a keynote speech at ICI’s 56th General Membership Meeting (GMM). After his opening remarks, Blair sat down with ICI Chairman Bill McNabb, Chairman and CEO of The Vanguard Group, to discuss a range of issues. The session headlined the three-day meeting, which began yesterday in Washington, DC.

GMM Policy Forum: BlackRock’s Larry Fink Speaks with ICI’s Paul Stevens

By Todd Bernhardt

May 21, 2014

The fund industry needs to stop focusing on the moment and start focusing on outcomes when advising investors on their resources, said Laurence D. Fink, chairman and CEO of BlackRock, at ICI’s Annual Policy Forum, part of the Institute’s 56th General Membership Meeting (GMM).

“Market Tantrums” and Mutual Funds: A Second Look

By Sean Collins and Chris Plantier

May 19, 2014

Over the past year, policymakers who are focused on financial stability have pursued a theory that mutual fund investors can destabilize financial markets by redeeming from funds when markets decline. According to this theory, redemptions by fund investors lead fund managers to sell securities; those sales drive asset prices down further and, in turn, spur more investor flight, redemptions, and price declines.

For Concerns About Risk, a Better Way Forward

By Mike McNamee

May 16, 2014

Since the financial crisis, regulators in the United States and abroad have been looking for ways to prevent a repeat. But recently it seems they’ve gone off course.

Overseas Overreach

By Mike McNamee

May 15, 2014

The Financial Stability Board (FSB)—composed of financial regulators and central bankers from around the globe—is proposing a flawed methodology that inappropriately puts regulated U.S. funds under scrutiny for possible designation as global systemically important financial institutions—or G-SIFIs.

How SIFI Designation Could Lead to a New Taxpayer Bailout

By Mike McNamee

May 14, 2014

We have spent the past several days discussing why efforts by international and domestic regulators to examine mutual funds as sources of systemic risk are unnecessary and inappropriate.

Who Are the FSB 14?

By Mike McNamee

May 13, 2014

In their search for ways that investment funds can pose risks to the financial system, regulators and central bankers from around the globe have proposed an arbitrary threshold: any investment fund with assets of more than $100 billion should automatically be subjected to further examination and consideration as a possible “global systemically important financial institution,” or G-SIFI.

The Market Crash That Never Came

By Mike McNamee

May 12, 2014

U.S. and international banking regulators, in their search for ways that mutual funds and their managers could threaten financial stability, have come up with a simple story: fund investors and asset managers “crowd or ‘herd’ into popular asset classes or securities” and thus “magnify market volatility.”

Size by Itself Doesn’t Matter—Leverage Does

By Mike McNamee

May 9, 2014

Second in a series of Viewpoints postings on funds and financial stability.

The threshold set by the Financial Stability Board (FSB) for examining whether a regulated fund could pose risk to the financial system should be redrawn—or better yet, withdrawn.

SIFI Designation for Funds: Unnecessary and Harmful

By Mike McNamee

May 8, 2014

U.S. and international regulators are examining whether asset managers or the investment funds that they offer could be sources of risk to the overall financial system and should thus be designated as systemically important financial institutions (SIFIs).

ICYMI: "The Feds Target Money Managers"

By Mike McNamee

May 7, 2014

Yesterday’s editorial in the Wall Street Journal, “The Feds Target Money Managers,” neatly summed up the case against treating asset managers as systemically important financial institutions (SIFIs) and subjecting them to bank-style regulation.

ICYMI: Congress Asks Questions About SIFI Designation and Asset Managers; SEC Chair White Provides Telling Answers

By Mike McNamee

April 30, 2014

DC scene setter, 2013–2014: The Financial Stability Oversight Council (FSOC) is examining asset managers for possible “systemically important financial institution” (SIFI) designation, which would bring with it enhanced prudential regulation from the Federal Reserve. Such “bank-style” regulation is foreign to U.S. capital markets.

ICI Statement: FSOC Seeking “Pretexts” to Designate Funds

By Mike McNamee

April 24, 2014

ICI President and CEO Paul Schott Stevens today made the following statement in response to media reports that the Financial Stability Oversight Council (FSOC) has stepped up its review of major asset managers—which could lead to their designation as “systemically important financial institutions,” or SIFIs—based on boilerplate metrics.

Seasonality, U.S. Money Market Funds, and the Borrower of Last Resort

By Chris Plantier

April 16, 2014

The March money market fund holdings data indicate a large drop in the share of fund assets allocated to European counterparties and a large increase in the share of fund assets allocated to U.S. counterparties. This shift is likely temporary and reflects reduced willingness of European banks to borrow from money market funds at the end of the quarter, rather than reduced demand from money market funds. Also, the increase in lending to U.S. counterparties is almost entirely due to the large increase in money market fund lending to the Federal Reserve via its overnight reverse-repo (repurchase agreement) facility.

ICI Responds to the FSB Consultation on Systemic Risk and Investment Funds

April 8, 2014

In early January, the Financial Stability Board (FSB)—an international group of financial authorities—published a consultation paper on the issue of systemic risk and investment funds.

ICI Response to Bank of England Haldane Speech on Asset Management and Potential Risk

By Mike McNamee

April 4, 2014

Today, ICI President and CEO Paul Schott Stevens made the following comment in response to a speech by Andy Haldane, currently executive director of the Bank of England and slated to become its chief economist in June.

U.S. Prime Money Market Funds and European Borrowing

By Chris Plantier

March 18, 2014

European holdings by U.S. prime money market funds have fluctuated significantly since early 2011.

Why Asset Management Is Not a Source of Systemic Risk

By Paul Schott Stevens

March 17, 2014

This Viewpoints post is a summary of a speech given by ICI President and CEO Paul Schott Stevens at the Mutual Funds and Investment Management Conference. The entire speech is now available.

Since September, U.S. and international regulators have released reports suggesting that asset managers or the funds that they offer may be sources of risk to the overall financial system. ICI does not agree that the asset management sector poses systemic risk. Nonetheless, these reports could be the predicate for new, bank-style prudential regulation of the asset management industry—which could significantly harm funds and the investors who use them.

Money Market Funds and Liquidity Ratios: Why So High and Stable?

By Chris Plantier

February 19, 2014

Second in a series of posts about ICI’s new data release, a monthly compilation and summary of portfolio data from taxable money market funds. To find out more, read the first post about the new data summary or this list of answers to frequently asked questions.

The SEC’s 2010 money market fund reforms require taxable funds to hold at least 30 percent of their assets in securities that are deemed to be liquid within five business days (known as weekly liquidity) and at least 10 percent of their assets in securities that are deemed to be liquid in one business day (known as daily liquidity). In practice, money market funds—especially government money market funds—hold liquidity well above these minimum standards, and these ratios change very little in any given month.

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.

ICI’s New Data Release: Further Enhancing the Transparency of Money Market Funds

By Chris Plantier

January 21, 2014

The 2010 reforms to money market mutual funds greatly enhanced the transparency of these funds, giving regulators, analysts, and investors greater insight into important elements of funds’ holdings and operations.

The reforms required funds to disclose their entire portfolio holdings to the public on their company websites five business days after the end of each month. Money market funds also are required to file a more detailed disclosure—SEC Form N-MFP—with the Securities and Exchange Commission directly. The SEC releases this more detailed data to the public 60 days after it’s filed. The SEC does not, however, summarize the data, leaving the public with no non-commercial access to a broad look at holdings across the industry.

Column Makes the Same Mistakes as OFR

By Paul Schott Stevens

January 20, 2014

In recent months, both the U.S. Treasury Department's Office of Financial Research (OFR) and international regulators such as the Financial Stability Board (FSB) have examined whether asset managers pose risks to financial stability. One report is deeply flawed; the other offers a more informed view. Unfortunately, Gretchen Morgenson’s New York Times column (“Bailout Risk, Far Beyond the Banks,” January 12) veers toward the flawed report.

‘Sponsor Support’ for Money Market Funds Is Old—and Overblown—News

By Mike McNamee

October 21, 2013

A story in the October 21 issue of the Financial Times (“Almost 20 money market funds bailed out”; subscription required) takes old numbers and tries to present them as news.

Check the Facts: Funds Engage Actively on Corporate Governance

By Ianthé Zabel

July 19, 2013

ICI president and CEO Paul Schott Stevens recently sent the following letter to the New York Times:

Every mutual fund or other registered investment company is required by law to cast votes on proxy proposals in the interests of the fund and its investors. Generally, funds interpret this to mean that they should support proposals that will promote good corporate governance and increase the value of the funds’ investments, carefully weighing shareholder interests and fund objectives.

Read more…

TOPICS: Fund Regulation

Key Points to Remember on Fund Fees

By Sean Collins and Bob Grohowski

July 12, 2013

Over the past two decades, investors have paid less and less to own shares of mutual funds.

Eliminating Confusion in MSRB Rulemaking

By Tamara Salmon

March 8, 2013

The Municipal Securities Rulemaking Board (MSRB) has asked for input on how it can improve its approach to rulemaking. We’ve responded with several recommendations for the agency, including steps that would eliminate confusion relating to the regulation of 529 college savings plans.

Read more…

TOPICS: Fund Regulation

One Size Does Not Fit All in Regulation of Financial Benchmarks

By Robert C. Grohowski, Mara Shreck, and Giles Swan

March 1, 2013

Following controversy surrounding calculation of the London Interbank Offered Rate (LIBOR), international regulators are closely scrutinizing the methodology, use, and oversight—among other issues—of financial benchmarks.

Read more…

TOPICS: Fund Regulation

Securities Lending and Repos: FSB Intrudes on Areas Best Left to National Regulators, Market Forces

By Robert C. Grohowski and Giles Swan

January 17, 2013

The Financial Stability Board (FSB), the international body established by the G20 to promote coordination among authorities responsible for financial stability, has made a number of recommendations toward creating a global policy framework for the securities lending and repurchase agreement (repo) markets.

Read more…

TOPICS: Fund Regulation ICI Global

Sticking to the Facts of Money Market Fund Regulation

By Dan Waters

October 25, 2012

In a recent column, the Evening Standard’s Anthony Hilton includes money market funds as part of a network he suggests forms “an unregulated zone” with “no oversight.”

The Facts and Principles That Must Guide Money Market Fund Reform

By Dan Waters

October 3, 2012

In Madrid this week, the board of the International Organization of Securities Commissions will choose their course of action on money market funds.

ICI Responds to Geithner Letter to FSOC on Money Market Funds

By Ianthe Zabel

September 27, 2012

Today, ICI President and CEO Paul Schott Stevens made the following comment in response to a letter from U.S. Treasury Secretary Timothy Geithner to the members of the Financial Stability Oversight Council about proposed money market fund regulations.

Ensuring Effective and Reasonable Data Collection on 529 Plans

By Tamara K. Salmon

September 17, 2012

The Municipal Securities Rulemaking Board (MSRB) has proposed a regulation that would increase the amount of information it collects on 529 educational savings plans. ICI supports the MSRB’s goal of having the information it needs to carry out its oversight responsibilities. However, we have serious concerns about this particular proposal. The MSRB must strike a careful balance to ensure that it receives meaningful information without imposing unreasonable requirements on those complying with the rules. We’ve recently expressed this view, along with several recommendations for the proposal, in a letter to the MSRB.

Read more…

TOPICS: Fund Regulation

Creating Derivatives Rules That Work Globally

By Jennifer S. Choi and Giles Swan

September 5, 2012

Derivatives—which include instruments such as options, futures, and swaps—are important portfolio management tools for funds worldwide, providing options and flexibility to fund managers as they carry out investment strategies and manage risks.

Read more…

TOPICS: Fund Regulation

JOBS Act Proposal Fails on Investor Protection

By Paul Schott Stevens

August 29, 2012

Today, the Securities and Exchange Commission (SEC) issued a proposal to implement an important part of the Jumpstart Our Business Startups Act, or JOBS Act.

Read more…

TOPICS: Fund Regulation

Better Disclosure: Distinguishing 529 Plans from Traditional Municipal Bond Offerings

By Tamara K. Salmon

August 8, 2012

The fund industry strongly supports effective public disclosure to ensure that retail and institutional investors can get the information they need to make sound investments. For disclosure to be effective, however, it has to align with marketplace realities.

Read more…

TOPICS: Fund Regulation

New York Times Trips into the “Money Market Funds Are Banks” Trap

By Karrie McMillan

July 6, 2012

Floyd Norris’ column, “Money Market Funds and Their Allies Resist New Rules,” falls into the trap of concluding that money market mutual funds are banks. They’re not.

UCITS V—Significant Changes for European Funds and Fund Managers

By Giles Swan

July 3, 2012

Today the European Commission adopted a proposal for revisions to the Undertakings for Collective Investment in Transferable Securities (UCITS) framework, which governs cross-border retail investment funds in Europe.

Money Market Fund Redemption Restrictions Would Drive Investors and Intermediaries Away from Money Market Funds

By Kathleen Joaquin

June 21, 2012

If you’re like most investors, money market funds mean stability, liquidity, and convenience.

Yet, some of these hallmark features could become a thing of the past if the Securities and Exchange Commission (SEC) imposes redemption restrictions on money market funds.

How would these redemption restrictions work?

The SEC’s contemplated redemption restrictions would essentially deny investors full use of their cash by escrowing a portion of a shareholder’s money market fund account on an ongoing basis. In the unlikely event that the fund breaks the dollar, the restricted shares would then be used to absorb first losses.

Forcing Money Market Funds to “Float”: Hurting Investors, Increasing Risk

Paul Schott Stevens

June 11, 2012

It’s rare to see the Wall Street Journal editorializing in favor of regulation for regulation’s sake.

The SEC Should Protect All Investors from Misleading Hedge Fund Ads

By Robert C. Grohowski

May 31, 2012

In early April, President Obama signed the Jumpstart Our Business Startups Act, or JOBS Act, into law. Most of the JOBS Act has little to do with the fund industry, but one provision—the repeal of a long-standing ban on advertising private securities offerings—has the potential to open the door to misleading ads for private funds, such as hedge funds. To be clear, these won’t be mutual fund advertisements; nonetheless, we are concerned that misleading ads for any fund will harm investors, cause confusion, and damage the reputation of all funds in the marketplace.

Read more…

TOPICS: Fund Regulation

Rulemaking Must Reflect Realities of Funds’ Access to Shareholder Information

By Kathleen Joaquin and Tamara K. Salmon

April 30, 2012

We are seeing a troubling development in Washington. In high-profile areas such as money market funds and anti–money laundering measures, regulators continue to pursue rules premised on the notion that mutual funds know or can obtain detailed information on each of their underlying shareholders.

Allegations Made in Indiana University Study Are Speculative and Dubious

By Robert C. Grohowski

April 27, 2012

Thanks to mutual funds’ structure and regulation, fund investors enjoy a number of protections. One among them is that advisers to funds, as well as directors on fund boards, have fiduciary duties. This means they have a fundamental, legal obligation to act in the best interests of the fund—and its shareholders—with undivided loyalty and utmost good faith.

Read more…

TOPICS: Fund Regulation

Washington Post Mischaracterizes the Strongest Federal Securities Law

By Paul Schott Stevens

April 20, 2012

Today I submitted the following letter to the editor of the Washington Post:

Without a doubt, our federal securities laws and the regulations that implement them may be improved and are worthy subjects for journalistic scrutiny. David Hilzenrath wasted an opportunity to advance that discussion with his recent article. Rather than focus on genuine weaknesses in the system, he mischaracterizes and criticizes the strongest law in the federal securities arsenal and a regulatory tool that has brought untold benefits to investors.

Read more…

TOPICS: Fund Regulation

What Happens If ‘Floating’ Funds Don’t Float?

By Jane Heinrichs and Greg Smith

March 29, 2012

Some recent coverage—including the CFOJournal blog of the Wall Street Journal—suggests that worries about the impact on investors of forcing money market funds to float their net asset value (NAV) may be overblown. The story goes like this: the mark-to-market prices of money market funds, and the experience of a few money market funds that already operate with a floating NAV, show that fluctuations in the “floating” value would be minuscule—rarely large enough to change the penny-rounded per-share price of the fund. So if floating funds don’t float, what’s the harm?

Money Market Funds: Let’s Stick to the Facts

By: Brian Reid

March 6, 2012

As a banking regulator who was in office during the worst banking crisis since the Great Depression, Sheila Bair knows that banks and money market funds are not the same. Yet in her recent Huffington Post piece, Bair blurs vital distinctions in an effort to convince the reader that money market funds are in fact extremely risky banks—and thus need a stiff dose of banking regulation.

CFTC Decision Imposes Inconsistent Requirements on Funds, Hurts Shareholders

By: Karrie McMillan

March 5, 2012

The Commodity Futures Trading Commission (CFTC) recently finalized a rule—known as Rule 4.5—that will require many advisers to mutual funds that invest in commodity futures, commodity options, and swaps to register with the agency. This development is deeply troubling for at least two reasons:

It will impose duplicative and fundamentally inconsistent requirements on these funds.
Shareholders will pay the ultimate price for this rule in the way of increased fees and fewer investment options.

The Honest Truth About Forcing Money Market Funds to Float

By Brian Reid

February 29, 2012

Advocates for further regulation of money market funds string together a loose chain of arguments to create the impression that money market funds are bank products, rather than investment securities. From this, they conclude that these funds need bank-like regulation. Sallie Krawcheck’s commentary in today’s Wall Street Journal is the latest effort in this campaign.

The ‘Hue and Cry’ over Money Market Funds Is a Chorus of Many Voices

By Paul Schott Stevens

February 24, 2012

Securities and Exchange Commission Chairman Mary Schapiro took aim at money market funds again today, this time lamenting “the hue and cry being raised by the industry” against the proposals that she champions.

Proposal to Implement the Volcker Rule Raises Deep Concerns for U.S. Registered Funds

By Paul Schott Stevens

February 14, 2012

Congress enacted the provision of the Dodd-Frank Act known as the Volcker Rule to restrict banks from using their own resources to trade for purposes unrelated to serving clients—something known as “proprietary trading.”

Proposal to Implement Volcker Rule Raises Significant Issues for Regulated Funds Globally

By Dan Waters

February 14, 2012

Congress enacted the provision of the Dodd-Frank Reform Act known as the Volcker Rule to restrict banks from sponsoring and investing in hedge funds (so-called covered funds) and using their own resources to trade for purposes unrelated to serving clients—something known as “proprietary trading.”

A Bad Diagnosis Could Be Fatal for Money Market Funds

By Paul Schott Stevens

February 13, 2012

Bad diagnosis leads to bad prescriptions—and the errors can be fatal. The Wall Street Journal’s lead editorial today, “Money Fund Make-Over,” falls into that trap.

The Rx of this editorial is premised on the notion that money market fund investors don’t understand that they’re just that—investors. Yet every fund’s prospectus provides a clear description of all risks and rewards associated with the fund. No fund offers any expectation of an explicit or implicit guarantee by the fund sponsor or the U.S. government. That message is repeated in virtually every communication from money market funds to investors.

Amended CFTC Rule 4.5 Appears to Impose Unnecessary Burdens on Many Mutual Fund Advisers

By: Rachel McTague

February 10, 2012

On February 8, the Commodity Futures Trading Commission (CFTC) issued amended Rule 4.5, a regulation governing commodity pool operators (CPOs), as well as a related rule proposal. Among other changes, the amendments to the rule significantly narrow the ability of registered investment advisers to rely on the rule’s exclusion from regulation as a CPO. As a result, many advisers will be required to register with the CFTC even though they are already regulated by the Securities and Exchange Commission (SEC).

The SEC’s Money Market Fund Plans—Scoring a Hat Trick Against Investors and the Economy

By Paul Schott Stevens

February 7, 2012

The Wall Street Journal reports today that the Securities and Exchange Commission (SEC) continues to pursue regulatory changes for money market funds that will harm investors, damage financing for businesses and state and local governments, and jeopardize a still-fragile economic recovery. Quite a regulatory hat trick.

Fund Investment in Commodities Provides Opportunity and Diversification for Investors

By Karen Lau Gibian and Rachel H. Graham

January 26, 2012

On Capitol Hill, a hearing at the Permanent Subcommittee on Investigations (PSI) raises questions about mutual fund investors’ ability to get commodity exposure in their portfolios and suggests the Internal Revenue Service (IRS) should no longer allow this type of investment.

ICI Registers Deep Concerns with the Volcker Rule Proposal

By Rachel H. Graham

January 18, 2012

The “Volcker Rule” provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act was written to restrict banks from using their own resources to trade for purposes unrelated to serving clients. While the Volcker Rule was not directed at U.S. mutual funds and other registered investment companies, its proposed implementation raises deep concerns for the U.S. registered fund industry.

Volcker Rule Implementation Threatens Global Investment Funds and Their Shareholders

By Dan Waters

January 18, 2012

The proposed implementation of the so-called Volcker Rule has serious implications for global investment funds and their shareholders. Like our U.S.-based ICI colleagues, ICI Global has today voiced concerns about this rule in a statement to the U.S. House subcommittees examining how the rule will impact markets and investors.

PCAOB Must Demonstrate Need for Mandatory Audit Firm Rotation

By Amy Lancellotta and Gregory Smith

December 22, 2011

The Independent Directors Council (IDC) and the Investment Company Institute (ICI) oppose requiring a mandatory rotation of audit firms as detailed in a concept release from the Public Company Accounting Oversight Board (PCAOB).

Time to Stamp Out the Confusion Around ‘Shadow Banking’

By Brian Reid

December 6, 2011

In the United States, money market funds are governed by tight risk-limiting rules, rules that have become considerably tighter since 2008. The Securities and Exchange Commission (SEC) has indicated further changes are forthcoming.

Yet some recent commentary and reporting on money market funds misses this fact, substituting instead the vague notion that these funds lurk in a seemingly unregulated world of “shadow banking,” an epithet used to debase a large group of nonbank financial intermediaries and activities. A recent Wall Street Journal column, for example, characterized money market funds as “one of the riskiest participants in shadow banking.” Last May, a Reuters story described shadow banking as “a network of loosely regulated private equity, hedge, and money funds that together are large enough to topple the global financial system.”

A Thoughtful Approach to Regulating Derivatives and Protecting Investors

Robert C. Grohowski

November 8, 2011

A Thoughtful Approach to Regulating Derivatives and Protecting Investors

Read more…

TOPICS: Fund Regulation

Washington Post Columnist Ignores Regulation, Transparency of Funds

By Paul Schott Stevens

November 7, 2011

Today I submitted the following letter to the editor of the Washington Post: Mutual funds are among the most regulated and transparent investment vehicles available, with investor protection as a defining principle. In his Sunday column, Steven Pearlstein chose to ignore that record.

ICI Responds to Hearing on Excessive Speculation

By Stephanie Ortbals-Tibbs

November 3, 2011

ICI issued the following statement in response to today’s hearing, “Excessive Speculation and Compliance with the Dodd-Frank Act,” before the Senate’s Permanent Subcommittee on Investigations.

The Volcker Illusion: Why Bank Regulation Won't Work for Money Market Funds

By Paul Schott Stevens

October 24, 2011

The Volcker Illusion: Why Bank Regulation Won't Work for Money Market Funds

ICI Responds to Hearing on Exchange-Traded Funds

By Stephanie Ortbals-Tibbs

October 19, 2011

ICI issued the following statement in response to today’s hearing in the Senate Banking Subcommittee on Securities, Insurance, and Investment, “Market Microstructure: Examination of Exchange-Traded Funds.”

The Facts Missing From a Wall Street Journal Column on Money Market Funds

By Mike McNamee

October 18, 2011

Misinformation lurks in a recent column from Wall Street Journal Money & Investing editor Francesco Guerrera, “Hidden Dangers Lurking in Money Market Funds.” Given the vital role that money market funds play in our economy, regulators and investors alike need the best information possible on this topic. So let’s correct the record with a few key facts.

A Win for Both Fund Advisers and the SEC

By Tami Salmon

September 28, 2011

In October 2010, ICI began to work with staff at the Securities and Exchange Commission (SEC) to obtain no-action relief from a recordkeeping requirement of the “pay-to-play” rule, which the SEC adopted in July 2010. SEC staff recently granted that no-action relief, a positive development both for advisers to mutual funds and the SEC’s staff.

Read more…

TOPICS: Fund Regulation

Commentary: Court Strikes Down SEC’s Proxy Access Rule

By Dorothy A. Berry

September 14, 2011

On July 22, the United States Court of Appeals for the District of Columbia Circuit vacated the proxy access rule adopted by the Securities and Exchange Commission (SEC) last year. The court found that the SEC had failed to adequately assess the economic effects of the rule and noted in particularly harsh terms the SEC’s failure to adequately address the rule’s impact on investment companies. The case was brought by the Business Roundtable and the U.S. Chamber of Commerce, and IDC filed an amicus brief jointly with ICI in support of their petition to vacate the rule as applied to investment companies. We’re pleased with the result but disappointed that it took a litigated action to get here.

Read more…

TOPICS: Fund Regulation

The Uphill Path to Better Economic Analysis in Rulemaking

By Paul Schott Stevens

August 10, 2011

Last month, the United States Court of Appeals for the District of Columbia Circuit vacated the Securities and Exchange Commission’s rule on proxy access. The unanimous ruling marked the fifth time since 2005 that the DC Circuit has struck down an SEC rule, and the third decision based on the agency’s failure to properly weigh economic consequences and to consider—as the law requires—the effects of its rules on efficiency, competition, and capital formation.

The Lingering Threat of Floating NAVs

By Mike McNamee

August 5, 2011

Despite widespread opposition from dozens of business, municipal, and investors groups, regulators continue to ponder the question of whether money market funds should be required to abandon the stable $1.00 net asset value (NAV) in favor of a floating NAV.

In Case You Missed It: Coverage of House Financial Services Committee Hearing on Funds

By Ianthé Zabel

June 28, 2011

The future of money market funds, how to define “systemic risk” to the financial system, and fiduciary standards for retirement plans were among the topics discussed at a hearing last week before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises. ICI President Paul Schott Stevens testified at the hearing, along with representatives from ICI member firms Fidelity Management & Research Company and the Vanguard Group.

Take One Idea Off the Table: Forcing Money Market Funds to Float

By Mike McNamee

June 3, 2011

The Investment Company Institute would like to thank the Wall Street Journal for its balanced approach in analyzing the debate over money market fund regulation—providing countervailing views from Yale University Professor Jonathan Macey and Columbia Law School Professor Jeffery Gordon about how to make money market funds even more resilient in the face of the next financial crisis.

Read more…

TOPICS: Fund Regulation

Money Market Funds: Four Key Points

By Mike McNamee

May 10, 2011

Later today, the Securities and Exchange Commission will hold a roundtable on money market funds and systemic risk. ICI Chief Economist Brian Reid will be one of the panelists at the roundtable, which should be an interesting discussion. Ahead of that discussion, here are four key points worth keeping in mind.

Wall Street Journal Editorial Ignores “Economic Disruption” of Floating the Value of Money Market Funds

By Ianthe Zabel

May 9, 2011

The Wall Street Journal’s lead editorial today used a flawed analysis to mischaracterize money market funds and the recent efforts to make them more resilient in extreme market conditions. ICI President and CEO Paul Schott Stevens has submitted a letter to the editor in print and online to respond.

Coping in the Expanding World of Compliance

By Karrie McMillan

May 5, 2011

Compliance officers play a special role in the fund industry. In a nutshell, their job is to make sure the rules are followed—and thus to help maintain the industry’s fiduciary culture and the investor trust that it fosters.

Read more…

TOPICS: Events Fund Regulation

Wall Street Journal Falls Short with Story on Funds’ Commodity Investments

By Ianthe Zabel

April 26, 2011

Today’s Wall Street Journal included an article that attempted to analyze the debate over regulation of commodity investments through mutual funds. Unfortunately, the story omitted basic facts about mutual fund regulation and oversight, and thus fell short of providing an accurate explanation of the issue and debate.

CFTC Proposal Would Subject Funds to Duplicative, Conflicting Regulatory Requirements

By Sarah Bessin and Rachel Graham

April 15, 2011

Funds use swaps and other derivatives in a variety of ways to manage their investment portfolios, and many of these uses are unrelated to speculation. This is why we have been particularly concerned by a proposal from the Commodity Futures Trading Commission (CFTC) to revise Rule 4.5, which provides an exclusion for funds and certain “otherwise regulated” entities from regulation as commodity pool operators (CPOs).

The Challenges of Dodd-Frank Implementation

By Paul Schott Stevens

March 31, 2011

Even though our industry was not a direct target of the Dodd-Frank Wall Street Reform and Consumer Protection Act, funds face challenges in coping with the law’s implementation. At the U.S. Chamber of Commerce’s Fifth Annual Capital Markets Summit yesterday, I had a chance to discuss several of these challenges and their implications for funds and regulators alike.

40 Years Later, Money Market Funds Still Aren’t Banks

By Brian Reid

March 3, 2011

Paul A. Volcker is a distinguished leader who for decades has devoted his prodigious talents to the service of our country. However, as he makes clear in his recent comment letter to the Securities and Exchange Commission, his long opposition to money market funds—dating back almost 40 years—hasn’t ended.

“Systemically Important” Designation is a Tool That Should Be Used Sparingly

By Paul Schott Stevens

February 25, 2011

This morning, I participated in a panel discussion addressing the business community’s concerns with the Financial Stability Oversight Council’s (FSOC) proposal on the criteria to measure a company’s systemic risk. It was a lively and timely conversation; I wanted to share here some of the perspective that I brought to the panel on behalf of ICI.

ICI Expresses Concerns to CFTC on Whistleblower Programs

By Tamara K. Salmon

February 9, 2011

Back in December, we commented on the Securities and Exchange Commission’s proposed new whistleblower rules, expressing ICI’s serious concerns about the unintended consequences that will likely result from the program.

Read more…

TOPICS: Fund Regulation

New ICI Research Examines Money Market Funds’ Pricing

By Rochelle L. Antoniewicz and Sean S. Collins

January 25, 2011

Today, we released new research, Pricing of U.S Money Market Funds. This paper starts by explaining how U.S. money market funds seek to maintain a stable $1.00 per share net asset value (NAV). The NAV is the price at which investors purchase or redeem shares.

ICI’s Response to “Money Market Fund Reform Options”

By Jane G. Heinrichs

January 11, 2011

We’ve just filed a comment letter with the Securities and Exchange Commission addressing the reform options outlined in the President’s Working Group on Financial Markets (PWG) Report on “Money Market Fund Reform Options.”

Proposed SEC Whistleblower Program Could Backfire

By ICI Viewpoints

December 17, 2010

Today we filed a comment letter on the Securities and Exchange Commission’s proposed new whistleblower rules. Our letter registers the Institute’s very serious concerns about the unintended consequences that will likely result from the program, given its proposed design.

Read more…

TOPICS: Fund Regulation

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.

Read more…

TOPICS: Fund Governance Fund Regulation

U.S. Retirement Success Can Aid in EU Pension Modernization

By ICI Viewpoints

November 15, 2010

Understanding the successes of the U.S. retirement savings framework can aid European regulators as they consider reform of pension systems in the European Union, ICI said in a comment letter.

Read more…

TOPICS: Fund Regulation International

12b-1 Proposal Misses the Mark

By ICI Viewpoints

November 5, 2010

Today, ICI filed its comment letter on the Securities and Exchange Commission’s proposal to replace Rule 12b-1. While our letter commends the SEC for addressing some legitimate concerns with Rule 12b-1, we question the proposal’s timing and breadth, calling it far more extensive and intrusive than necessary.

Read more…

TOPICS: Fund Regulation

Companies Should Be Designated as “Systemically Significant” Only in Limited Circumstances

By ICI Viewpoints

November 5, 2010

The newly-created Financial Stability Oversight Council (FSOC) has been tasked with determining which nonbank financial companies are systemically significant and therefore require additional regulatory scrutiny. The FSOC has asked for input regarding the specific criteria and analytical framework it should use in making those designations.

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A Year of Advocacy: IDC’s 2018 Annual Review

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