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ARCHIVE
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). As our comment letters point out, the PCAOB has not clearly connected audit deficiencies discovered through its inspections of audits to a lack of auditor independence. Further, the PCAOB has failed to demonstrate any audit deficiencies specific to audits of investment companies.
With its concept release, the PCAOB is seeking ways to improve auditor independence, objectivity, and professional skepticism. According to the Board, limiting the number of consecutive years for which a registered public accounting firm could serve as the auditor of a public company—including a fund—may help avoid relationships between auditors and management that protect long-term relationships to the detriment of investors. The Board also believes mandatory audit firm rotation can create incentives for auditors to perform more-rigorous audits because they know that the successor auditor will scrutinize their work. Such an arrangement also enables the successor auditor to take a “fresh look” at the company’s financial reporting.
We agree that the integrity of the audit process depends on independent and expert auditors, but an audit firm rotation requirement is not necessary to achieve this goal and, in fact, could detract from it. Existing safeguards and recent enhancements to auditing standards are more than adequate to assure the independence of auditors. Indeed, we believe public company audits have improved significantly since the Sarbanes-Oxley Act of 2002 and its audit-related reforms.
A mandatory audit firm rotation could increase costs. The successor auditor would necessarily have to build additional hours during the first years of its tenure in order to become familiar with the client’s business, systems, and control environment. These additional hours could result in increased audit fees, which would be borne by fund shareholders. If the PCAOB’s proposal were implemented, a study estimated that initial year audit costs would increase by more than 20 percent over subsequent year costs.
Ironically, audit firm rotation could even increase the risk that the auditor will fail to detect errors or misstatements. The loss of institutional knowledge the incumbent auditor brings to the engagement, combined with a steep learning curve that the successor auditor must climb, may increase audit risk.
Our concerns about mandatory audit firm rotation are heightened in the fund context because of the limited number of audit firms that are qualified—in terms of expertise and independence—to audit fund financial statements. Auditing fund financial statements requires specialized industry and regulatory expertise. Only a limited number of audit firms currently possess this expertise. In addition, the universe of independent auditors able to satisfy the auditor independence requirements is made even smaller by factors specific to the fund industry, such as the broad definition of “investment company complex” and the use of funds offered through an audit firm’s 401(k) retirement plan to its employees.
Mandatory audit firm rotation would also undermine the authority and discretion of fund boards and their audit committees. As IDC explained, the Investment Company Act of 1940 (1940 Act) has long required independent directors to select a fund’s auditor. Indeed, picking an audit firm is one of only four responsibilities that the 1940 Act specifically assigns to independent directors—a clear measure of the importance of the audit function and the role of fund independent directors. This statutory approach has worked well, and the PCAOB should not infringe on its success. Determining whether to retain the fund’s current auditor is best left to the judgment of a fund’s independent directors, who work diligently to oversee fund audits and make determinations that are in the best interest of the fund and its shareholders.
We support the PCAOB’s mission to oversee the audits of public companies—including funds—to protect the interests of investors. In this concept release, however, the PCAOB fails to demonstrate how mandatory audit firm rotation would support that mission.
Additional resources:
- Frequently Asked Questions About Mutual Fund Directors
- Read more about ICI’s work in Operations and Technology.
- Independent Directors Council
Amy Lancellotta is Managing Director of the Independent Directors Council. Gregory Smith is Director of Operations, Compliance, and Fund Accounting for ICI.
TOPICS: Fund RegulationOperations and Technology
ICI Adds to Educational Resources on Exchange-Traded Funds
By Mike McNamee
December 16, 2011
ICI Adds to Educational Resources on Exchange-Traded Funds.
TOPICS: Exchange-Traded Funds
Money Market Funds Continued to Reduce Eurozone Holdings in November
By Sean Collins and Chris Plantier
December 16, 2011
Over the last year, U.S. money market funds have significantly reduced their holdings of debt securities issued by banks and other businesses headquartered in the 17 countries that use the euro as their currency. That trend continued in November.
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.”
TOPICS: Financial MarketsFund RegulationMoney Market 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
Data Update: Money Market Funds and the Eurozone Debt Crisis
By Sean Collins and Chris Plantier
December 2, 2011
In October, we discussed how portfolio managers of U.S. prime money market funds have addressed the ongoing debt crisis in the eurozone. Here is a look at the latest monthly data on these funds’ holdings by home country of issuer. We will revisit the topic in mid-December with updated analysis once November figures become available.
Now Is the Time to Put America on a Path of Fiscal Responsibility
By Paul Schott Stevens
November 21, 2011
On behalf of funds and the 90 million investors that they serve, fund industry leaders are sending a simple but urgent message to Congress and the White House: the time has arrived to put America’s fiscal house in order.
Thirty executives of companies represented on ICI’s Board of Governors, the chair of the Independent Directors Council, and I are joining together to send a letter to the co-chairs of the Joint Select Committee on Deficit Reduction—known as the “Super Committee”—every other member of Congress, and the President.
TOPICS: Financial MarketsTaxes
Deloitte/ICI Study Shows Retirement Plan Fees Driven Primarily by Plan Size, Asset Allocation
By Sarah Holden
November 16, 2011
According to a comprehensive new study, primary factors driving fees in 401(k) and other defined contribution retirement plans are the number of plan participants and average participant account balance, as well as the allocation of plan assets to equity investment options.
TOPICS: 401(k)Policy ResearchRetirement Research
A Thoughtful Approach to Regulating Derivatives and Protecting Investors
Robert C. Grohowski
November 8, 2011
A Thoughtful Approach to Regulating Derivatives and Protecting Investors
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.
TOPICS: Financial MarketsFund Regulation
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.
TOPICS: Commodity InvestmentsExchange-Traded FundsFinancial MarketsFund Regulation
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.”
TOPICS: Exchange-Traded FundsFinancial MarketsFund Regulation
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.
TOPICS: Fund RegulationMoney Market Funds
Money Market Funds’ Prudent Response to European Challenges
By Sean Collins and Chris Plantier
October 14, 2011
The ongoing debt crisis in the eurozone poses challenges for portfolio managers of U.S. prime money market funds, as those managers actively continue to adjust their holdings to meet new developments. The latest monthly data on money market funds’ holdings demonstrate that these funds are carefully managing their risks in Europe, and have been gradually reducing eurozone holdings for some time now.
Investors and Their Long-Term Commitment to Saving
By Paul Schott Stevens
October 14, 2011
This week, I had the pleasure of addressing members of the Rotary Club of Seattle on “The Outlook for Investors and Investing.” My speech approached this subject in part by examining our present situation in the historical context of past market bubbles and downturns.
TOPICS: Financial Markets
Global Markets: ICI Urges Measured Policy Approaches to Reforms
By Ari Burstein
October 12, 2011
Across the globe, regulators remain active in examining possible rule changes and other initiatives to bolster the integrity of financial markets. As these efforts proceed, ICI has urged balanced policy responses that can strengthen markets while preserving and enhancing efficiency that benefits funds and their shareholders.
TOPICS: Financial Markets
A New Voice for Global Investment Funds
By Paul Schott Stevens
October 10, 2011
Over the past two decades, the world has witnessed the rise of asset managers as global financial intermediaries. The fund industry has been at the forefront of this movement, vigorously expanding its international reach and offering investors opportunities to diversify and to access new markets.
TOPICS: ICI GlobalInternational
Mutual Fund Investors Remain Steady Despite Volatile Market
By Brian Reid and Chris Plantier
September 30, 2011
Each month, ICI reports definitive long-term mutual fund flows, made up of stock, bond, and hybrid funds. The Institute also provides an estimate of weekly flows for those funds. It’s important to consider both weekly and monthly data when interpreting the activity of fund investors. Despite sizable August outflows, more-recent weekly data suggest that investors remain cautious but steady.
TOPICS: Financial Markets
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.
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.
TOPICS: Fund Regulation
Déjà vu—U.S. Money Market Funds and the Eurozone Debt Crisis
By Chris Plantier and Sean Collins
September 12, 2011
In June, we wrote about the indirect exposure that U.S. prime money market funds have to European sovereign debt, especially Greek debt, through their holdings of securities issued by European banks. At that time, we noted that these funds had no direct exposure to Greek sovereign debt, and that they were managing their indirect exposure by constantly examining the quality of their portfolio and the creditworthiness of investments. By July 1, we could report that U.S. prime money market funds had no direct exposure to Portuguese or Irish government or bank debt.
TOPICS: Money Market Funds
Changes to Cost Basis Rules Provide Investors More Flexibility
By Karen Lau Gibian
August 26, 2011
In a positive development for fund shareholders, the Department of the Treasury and the Internal Revenue Service have issued new cost basis reporting rules that enhance a fund’s ability to provide shareholders with average cost basis information. Fund shareholders have become quite familiar with average cost basis information, which many funds have been providing to their shareholders voluntarily for 20 years or more. The regulatory change makes it more likely that funds will continue to use this method as their default method for redeemed shares.
TOPICS: Taxes
New York Times Editorial Misrepresents the Behavior of 401(k) Investors
By Brian Reid
August 23, 2011
ICI Economists Provide Long-Term Mutual Fund Flow Analysis
By Brian Reid and Chris Plantier
August 17, 2011
All eyes were on the markets in early August just after Standard & Poor’s Corp. downgraded the long-term sovereign credit rating on the United States of America to AA+ from AAA and as Europe’s ongoing fiscal challenges dominated the news.
TOPICS: Financial Markets
‘One Size Fits All’ Doesn’t Fit Today’s Fund Investors
By Brian Reid
August 16, 2011
David F. Swensen is the chief investment officer of Yale University and a noted author of investment advice for the public. In books and articles over the last decade, he’s focused much of his attention on mutual funds. Yet he consistently ignores or is unaware of basic facts about how mutual funds operate, how investors seek and use funds, and how individuals manage their portfolios—gaps on full display in his latest commentary in the New York Times last weekend.
TOPICS: Investment EducationInvestor Research
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.
Standard & Poor’s Downgrades U.S. Government Debt
By Mike McNamee
August 6, 2011
On Friday, August 5, Standard & Poor’s Corp. downgraded the long-term sovereign credit rating on the United States of America to AA+ from AAA. The agency reaffirmed the U.S. government’s A-1+ short-term rating, which is the rating that money market funds rely upon in making their investment decisions. Moody’s Investor Services and Fitch Ratings Ltd. have reaffirmed their Aaa and AAA ratings for long-term U.S. government debt.
TOPICS: Financial Markets
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.
TOPICS: Fund RegulationMoney Market Funds
The Debt Ceiling Debate and Its Impact on Money Market Funds
By Chris Plantier and Sean Collins
August 4, 2011
Data on money market funds flows continue to draw attention, especially with today’s report that net outflows totaled $66 billion in the week ending August 3.
TOPICS: Money Market Funds
401(k) Plans Help Keep Americans on Track
By Paul Schott Stevens
August 1, 2011
ICI sees strong evidence that the features of 401(k) plans help Americans avoid overreaction to financial turmoil, by countering extremes in investor behavior that hard times often produce.
This was one of the key points that I made recently at the Ayco Summer InnerCircle Benefits and Compensation Conference in Saratoga Springs, New York. I invite you to look over my full presentation, which contains a trove of data and charts pertinent to retirement policy.
TOPICS: 401(k)Retirement Policy
It’s Highly Unlikely that Money Market Funds Will ‘Break the Dollar’ in U.S. Debt Crisis
By Chris Plantier and Sean Collins
July 29, 2011
The continuing impasse over the U.S. government’s borrowing limit—the “debt ceiling”—and efforts to rein in the growth of federal debt has raised many questions for investors in all types of financial assets. ICI believes that money market funds are no more vulnerable to these events than other assets: As ICI Chief Economist Brian Reid wrote yesterday, “I don’t know of any scenario in which money market funds would be disproportionately affected compared to other market participants by a failure to raise the debt ceiling.”
TOPICS: Money Market Funds
The Comprehensive Regulatory Framework Around IRAs
By Mary S. Podesta and Elena B. Chism
July 28, 2011
We occasionally encounter the puzzling misperception that individual retirement accounts (IRAs) are under-regulated—as in this recent Wall Street Journal story.
The truth is, IRA investors benefit from a comprehensive regulatory framework, one that governs the IRA itself, IRA providers, and, in most cases, the investments that are held within the account.
TOPICS: Retirement Policy
What’s Happening with Recent Money Market Fund Flows?
By Brian Reid
July 28, 2011
Statistics on money market funds inflows and outflows are currently a hot topic in the financial world, so it’s a good time to dig into the data and see if we can help explain the latest trends.
TOPICS: Money Market Funds
ICI Recommends Fixes to Margin Proposals for Uncleared Swaps
By Heather L. Traeger
July 22, 2011
Proposals on margin requirements for uncleared swaps could create regulatory gaps that would work against the goal of ensuring fair and orderly swap markets, ICI said in recent comment letters. We recommended changes to the proposals, which come from both banking regulators and the Commodity Futures Trading Commission (CFTC).
TOPICS: Financial Markets
Debt Ceiling Scenarios: ICI Addresses Key Questions Regarding Possible Impact on Money Market Funds
By Karrie McMillan and Brian Reid
July 20, 2011
As Paul Schott Stevens wrote on ICI Viewpoints earlier, a downgrade or default of U.S. Treasury securities would have grave implications for investors, markets, and economies around the world. This prospect raises a number of questions for funds and their shareholders, particularly for money market funds. We’ve prepared a set of “frequently asked questions,” focused on money market funds, to further address the key issues and dispel some of the uncertainty produced by this unprecedented policy situation.
TOPICS: Money Market Funds
Let’s Preserve America’s Financial Standing in the World
By Paul Schott Stevens
July 18, 2011
The impasse between Congress and the Administration over increasing the U.S. Treasury’s borrowing limit and dealing with long-term budget deficits has raised many questions about the impact on American investors and investments, including mutual funds. At ICI, we share the deep concern that many feel about policy actions that could undermine the full faith and credit of the U.S. government.
TOPICS: Financial MarketsMoney Market Funds
Numbers Show the Success of Automatic Enrollment
By Paul Schott Stevens
July 7, 2011
A July 7 story in the Wall Street Journal makes the assertion that a recently-enacted 401(k) law “suppresses” retirement savings. The assertion rests on faulty data interpretation. Look at the proper numbers, and the truth becomes clear—the 401(k) system, thanks in part to reforms brought about by the law, known as the Pension Protection Act of 2006, in fact promotes and increases retirement saving.
TOPICS: Retirement Policy
Dispelling Misinformation on Money Market Funds
By Brian Reid
July 1, 2011
The ongoing attention to U.S. prime money market funds’ exposure to the debt crisis in Greece has brought three questions to the fore:
TOPICS: Money Market Funds
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.
TOPICS: Fund RegulationGovernment Affairs
Before Congress, an Outpouring of Support for Money Market Funds
By Mike McNamee
June 28, 2011
Groups representing businesses and government officials from across the country recently sent a message to Congress: policymakers should preserve the fundamental features of money market funds. The occasion was last week’s hearing, “Oversight of the Mutual Fund Industry: Ensuring Market Stability and Investor Confidence,” held by the House Financial Services Committee’s Subcommittee on Capital Markets and Government Sponsored Enterprises.
TOPICS: Money Market Funds
Wall Street Journal Editorial Gets It Wrong Again on Money Market Funds
By Mike McNamee
June 27, 2011
The Wall Street Journal posted another misleading editorial on money market funds. ICI President and CEO Paul Schott Stevens has submitted a letter to the editor in print and online to respond. Here is the text of his submission:
TOPICS: Money Market Funds
Money Market Funds and European Debt: Setting the Record Straight
By Sean Collins and Chris Plantier
June 20, 2011
Recent events in Greece have drawn the media’s attention to indirect exposure that U.S. money market funds may have to European sovereign debt through their holdings of securities issued by European banks.
TOPICS: Money Market Funds
DOL Should Allow E-Delivery as Default for Plan Communications, Says ICI
By Anna Driggs
June 17, 2011
Given dramatic changes in technology over the last decade, the Department of Labor (DOL) should allow retirement plans to make e-delivery the default method for communicating plan information, ICI said in a recent comment letter. E-delivery will enhance communication and improve the security and privacy of personal and account information.
TOPICS: Retirement Policy
ICI Supports Treasury Proposal to Maintain Efficiency and Transparency of Foreign Exchange Swaps and Forwards Market
By Heather L. Traeger
June 16, 2011
Foreign exchange swaps and forwards are contracts that mutual funds and other investors use to help manage their portfolios. ICI members therefore have a strong interest in ensuring the market for foreign exchange (FX) swaps and forwards is highly competitive, efficient, transparent, and fair.
TOPICS: Financial Markets
Cracking Down on Tax Evaders Without Cracking Up U.S. Capital Markets
By Keith Lawson
June 15, 2011
The Foreign Account Tax Compliance Act (FATCA) is a law designed to ensure that U.S. persons holding assets through accounts in foreign financial institutions comply with their U.S. tax obligations. In other words, the law aims to crack down on tax evasion through offshore investments. It is set to apply to payments made beginning January 1, 2013.
TOPICS: InternationalTaxes
Switching to International Accounting Standards Wouldn’t Likely Benefit U.S. Fund Investors, ICI Tells SEC
By Gregory M. Smith
June 14, 2011
A key issue for ICI’s Operations team is regulator interest in harmonizing worldwide accounting standards. As Donald Boteler, ICI’s Vice President for Operations and Continuing Education, said in ICI’s latest annual report, “It’s a noble purpose, but it’s a big, big challenge.”
TOPICS: InternationalOperations and Technology
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.
TOPICS: Fund Regulation
Recent Data Underscores How Money Market Funds Have Responded to Regulatory Changes
By Sean Collins and Michael Breuer
May 19, 2011
One item discussed at ICI’s 2011 Money Market Funds Summit this week was how recent reforms adopted by the Securities and Exchange Commission (SEC) have made money market funds more resilient and ready to face future periods of severe market stress. The charts below, which we discussed at the summit, illustrate the idea.
TOPICS: Policy Research
Data Show Americans’ Commitment to Retirement Saving
By Sarah A. Holden
May 17, 2011
Despite the financial ups and downs of recent years, 401(k) participants have proven themselves both steady and committed to retirement saving.
ICI has a window into this commitment thanks to our surveys, conducted since 2008, of a cross section of recordkeeping firms representing a broad range of defined contribution (DC) plans and covering more than 23 million employer-based DC retirement plan participant accounts as of December 2010.
TOPICS: Retirement Research
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.
TOPICS: Fund RegulationMoney Market Funds
Experience Talks: Insight from Three Top Investment Leaders
By Inga Vitols
May 6, 2011
In a panel discussion moderated by John Rogers, Chairman and CEO of Ariel Investments, panelists Eddie Brown, President and CEO of Brown Capital Management, G. Stanley Cates, President of Longleaf Partners Funds, and Jack Laporte, Vice President of T. Rowe Price Associates, candidly discussed their own experiences and insight in money management and investing.
TOPICS: Events
SEC Chairman: SEC Examining Role of High Frequency Traders
By Rachel McTague
May 6, 2011
On the first anniversary of the 2010 “flash crash,” Securities and Exchange Commission (SEC) Chairman Mary Schapiro highlighted the role of high frequency traders that day and said there is cause for the SEC to examine their role.
TOPICS: EventsFinancial Markets
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.
TOPICS: EventsFund Regulation
Fostering the Next Generation of Investors
By Edward C. Bernard
May 4, 2011
In the four years since the financial crisis started, investors have been challenged to progress toward their financial goals even as markets have twisted and turned. For the most part, even in the face of considerable fear and uncertainty, investors stayed the course.
TOPICS: Events
The Way Forward with Fund Investors
By Greg Johnson
May 4, 2011
Each year, ICI’s General Membership Meeting offers the fund industry a chance to come together to reflect on the past year and to look ahead to new opportunities. For the past eight months, it’s been my honor and pleasure to chair the GMM Planning Committee, working with a dedicated and talented group of individuals to organize this meeting.
TOPICS: Events
Geithner: FSOC Will Bring Clarity to the Designation of 'SIFIs'
By Rachel McTague
May 4, 2011
In the four years since the financial crisis started, investors have been challenged to progress toward their financial goals even as markets have twisted and turned. For the most part, even in the face of considerable fear and uncertainty, investors stayed the course.
TOPICS: Events
Fact Book Illustrates the Dynamic, Evolving Fund Industry
By Brian Reid
May 3, 2011
Each year, the annual update of the Investment Company Fact Book gives ICI an opportunity to present a broad overview of the investment landscape by recording, in a single volume, insights gleaned from both our members and our own research. Sometimes the developments are slow, and the picture barely changes from one year to the next. In other years, there are large shifts that permanently affect the investment management business.
TOPICS: Investor Research
ICI Suggests Fixes for Proposal to Eliminate Ratings Requirement from Money Market Fund Rules
By Jane G. Heinrichs
April 27, 2011
Unintended and undesirable consequences could result from a Securities and Exchange Commission proposal to eliminate credit ratings as a required element in determining which securities are permissible investments for money market funds. In a recent comment letter, we suggested a few ways that the SEC can change its proposal to head off these unintended consequences.
TOPICS: Money Market Funds
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.
TOPICS: Commodity InvestmentsFund Regulation
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).
TOPICS: Commodity InvestmentsFinancial MarketsFund Regulation
Let’s Set the Record Straight on 401(k)
By Paul Schott Stevens
April 13, 2011
As states and localities struggle to control their budgets, more and more policymakers are considering fundamental changes in the retirement plans offered to public employees. This year, at least eight states have taken up legislation to change part or all of their public retirement plans from traditional defined benefit (DB) pensions to defined contribution (DC) plans similar to the 401(k)s that that are now the most common plans in the private sector. Many more public employers are likely to consider such changes in coming years.
TOPICS: 401(k)Retirement Policy
America’s Fiscal Challenge
By Paul Schott Stevens
April 12, 2011
Friends and colleagues sometimes ask me, “What keeps you awake at night?” In recent months, it’s the nightmarish level of debt that the federal government is accruing.
Put all politics aside: it is impossible to deny that Americans face an acute problem of budgetary overreach. Even before the financial crisis, our position as the world’s leading economy made us forgetful of basic principles of fiscal discipline—particularly the notion of balancing spending and revenues over the course of an economic cycle.
TOPICS: Financial Markets
Revisiting the Age-Old Active Versus Passive Debate
By Brian Reid
April 12, 2011
The New York Times recently published an article examining investor behavior in the context of an old debate: actively managed funds versus passive funds (such as index funds). When reading stories like this, it is important to keep a couple of key points in mind.
TOPICS: Investor Research
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.
TOPICS: Financial MarketsFund Regulation
For the Fund Industry, “Sunlight Through the Clouds”
By Karrie McMillan
March 29, 2011
The U.S. financial system is emerging from the global crisis. Financial markets have regained their footing. The Federal Reserve has significantly reduced its emergency facilities. The Securities and Exchange Commission has adopted its amendments to Rule 2a-7 for money market funds.
TOPICS: EventsFinancial Markets
Who Gets Retirement Plans and Why
By Peter Brady and Michael Bogdan
March 25, 2011
Most workers who are likely to have the ability to save and to be focused primarily on saving for retirement have access to employer-provided retirement plans, according to research we just released.
TOPICS: Retirement Research
Expense Ratios in 2010: Stock Funds Down, Bond Funds Flat
By Sean Collins and Michael Breuer
March 24, 2011
Mutual fund investors in 2010 paid lower average expense ratios in stock funds, but bond fund expense ratios remained unchanged, according to an annual research report on fund fees and expenses that we released today.
TOPICS: Policy Research
Closed-End Fund Assets Up 7 Percent in 2010
By Daniel Schrass, Judy Steenstra, and Dorothy Donohue
March 18, 2011
Total closed-end fund assets were $241 billion at year-end 2010, up 7 percent from year-end 2009, according to our recently released annual research report on the closed-end fund market. On net, closed-end fund assets increased by $16 billion during 2010.
TOPICS: Investor Research
The Facts on Mutual Funds and Securities Lending
By Michael L. Hadley, Tamara K. Salmon, and Gregory M. Smith
March 18, 2011
Recent stories in the press have addressed the issue of securities lending, particularly in the context of 401(k) plans. For example, a March 16 story in the Wall Street Journal (“Disclosure Sought on Fund Lending”) suggests that securities lending’ in 401(k) plans “prevented some employers and investors from withdrawing their money during the financial crisis.”
TOPICS: Retirement Policy
Treasury Secretary Timothy F. Geithner to Provide Policy Perspective at ICI’s 2011 GMM
By Sandra J. West
March 9, 2011
Since 1959, ICI’s General Membership Meeting has provided fund industry executives an exceptional forum to discuss key business issues, gain a deep understanding of the policy landscape, and network with colleagues from around the country and overseas.
TOPICS: Events
ICI Will Scrutinize Proposal Removing Ratings Requirement from Money Market Fund Rules
By Jane G. Heinrichs and Heather L. Traeger
March 4, 2011
On Wednesday, the Securities and Exchange Commission voted unanimously in favor of a proposal that would eliminate credit ratings as a required element in determining which securities are permissible investments for money market funds.
TOPICS: Money Market Funds
For the Sake of Retirement Savers, ERISA Rules Defining “Fiduciary” Need Clarity
By Paul Schott Stevens
March 3, 2011
Fiduciary status entails one of the highest obligations known to the law. Essentially, a fiduciary is one who takes it upon himself or herself to act for or advise another, thus inviting the other’s confidence and trust.
TOPICS: Retirement Policy
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.
TOPICS: Financial MarketsFund RegulationMoney Market Funds
Pursuing Sound Financial Regulation for International Markets
By Ari Burstein
February 25, 2011
Whether at home or overseas, ICI works to ensure that regulators pursue the creation of consistent and sensible rules for the financial markets. Internationally, we recently provided input to the European Commission, which is taking a comprehensive look at ways to reform regulation of European financial markets.
TOPICS: Financial MarketsInternational
SEC Proposal on Municipal Advisor Registration Could Create Unnecessary Regulatory Burden
By Heather L. Traeger
February 24, 2011
This week, we wrote a letter to the SEC to air our concern that its proposed registration regime for “municipal advisors” is too broad and will subject many well-regulated entities and individuals, including advisers to funds, to duplicative regulatory requirements.
TOPICS: Financial Markets
Wall Street Journal Story Inaccurately Portrays the Role of 401(k) Plans
By Sarah A. Holden
February 24, 2011
The February 19 Wall Street Journal article, “Retiring Boomers Find 401(k) Plans Fall Short,” is based upon a narrow slice of statistics and anecdotes, painting an inaccurate portrait of the role of 401(k)s in retirement.
TOPICS: 401(k)Retirement Research
ICI Report Provides Comprehensive Information on Fund Shareholders
By Daniel Schrass and Michael Bogdan
February 18, 2011
Today, we publish Profile of Mutual Fund Shareholders, 2010. The report contains a wealth of information on the 43.9 percent of U.S. households (representing 90.2 million investors) that own mutual funds.
TOPICS: Investor Research
Factors Behind Recent Growth in Retirement Assets
By Sarah A. Holden
February 17, 2011
Last month, we published The U.S. Retirement Market: Third Quarter 2010. The report showed that U.S. retirement assets rose nearly $1 trillion, or 6.1 percent, to $16.6 trillion in the third quarter of 2010.
TOPICS: Retirement Research
Check Your Savings Goals Next Week
By Sue Duncan
February 16, 2011
“America Saves Week” kicks off this Sunday, February 20. ICI and the ICI Education Foundation(ICIEF) encourage Americans to use the week as an opportunity to assess their savings activity and savings goals.
TOPICS: Investment Education
In Case You Missed it: ICI Members Speak Out on Money Market Funds
By Mike McNamee
February 16, 2011
In recent weeks, two top newspapers have published commentary from ICI members who make a compelling case for preserving the fundamental strengths of money market funds. We’ve pulled out a few highlights below, but both items are worth reading in their entirety.
TOPICS: Money Market Funds
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.
TOPICS: Fund Regulation
ICI Urges Caution on DOL Fiduciary Duty Proposal
By Mary S. Podesta
February 4, 2011
When is a person a fiduciary by virtue of providing investment advice to a retirement plan or its participants? That’s the question we addressed in a letter filed yesterday with the Department of Labor (DOL), which issued a proposal last October to revise its interpretation of the definition of “fiduciary” under the Employee Retirement Income Security Act (ERISA).
TOPICS: Retirement Policy
New ICI Research Shows Americans’ Commitment to Retirement Security
By Sarah A. Holden
January 27, 2011
Following the start of the financial crisis, we began closely monitoring the behavior of investors in defined contribution retirement (DC) plans, as well as the views of U.S. households of those plans.
TOPICS: Retirement Research
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 Urges Change in Cost Basis Rules to Avoid Harm to Fund Investors
By Karen Lau Gibian
January 13, 2011
A provision in the new cost basis rules could hurt fund investors. We recently contacted the Internal Revenue Service (IRS) and the U.S. Department of the Treasury, urging them to amend the rules to avoid this outcome.
TOPICS: Taxes
ICI Letter Details Benefits of Having Diversified Funds Investing in the Futures and Swaps Markets
By Heather L. Traeger
January 12, 2011
We’ve just filed a letter to the Commodity Futures Trading Commission (CFTC) on the use of position limits for derivatives. Our letter urges the CFTC to establish an exemption from position limits for funds that comply with the diversification and leverage requirements of the Investment Company Act of 1940.
TOPICS: Commodity InvestmentsFinancial Markets
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.”
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