The level of education surrounding mutual funds and ETFs should not be outpaced by innovation, fund managers say, responding to a recent speech by the SEC's Norm Champ on the regulator's efforts to provide more guidance to investment managers and oversight of products.

"My staff has joined up with ... examiners in an ongoing nationwide initiative to review distribution fees and practices," Champ stated in a speech delivered at the Investment Company Institute's Mutual Fund and Investment Management Conference in Orlando, Fla., last week.

Indeed, providers have seen the SEC up its focus in assessing mutual fund and ETF distribution practices, complementing FINRA's watch. "Mary Jo White has been more aggressive than predecessors in analyzing the due diligence practices and distribution procedures among mutual fund and ETF providers," says Dave Mazza, head of research for SPDR ETFs and SSgA Funds. "And they're looking to prosecute those firms that fail to adequately supervise the sale of such products," he adds. "So distribution is as scrutinized as ever."

This close watch on providers in terms of their distribution fees and practices comes as U.S. mutual fund product launches tripled in the second half of 2013, compared to the first half of 2013, as shown by new research from Cerulli Associates. Meanwhile, assets in the global ETF/ETP industry reached a new record high of $2.4 trillion as of February, consultancy firm ETFGI shows.

Providers and fund managers see many factors driving this focus on distribution. With regulators focused on the suitability of certain products for investors, providers are more pressured to educate advisors on the nuances of products to ensure they're used as they were intended. Spending on compliance along with technology to aid in the efficiency of distribution have also been priorities.

Read on to discover more about how providers are navigating the distribution landscape from Money Management Executive's distribution survey, detailed in this issue.

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