PALM DESERT, Calif In his last appearance before his constituents, Investment Company Institute President Matthew Fink went out swinging. Fink defended the trade group against a Wall Street Journal report Monday suggesting it knew about market timing long ago, as the ICI kicked off its annual Mutual Funds and Investment Management Conference here yesterday.
Citing the transcript of an ICI conference call in 2000, The Journal report quoted an Alliance Capital executive discussing the firms agreements with market timers. The newspaper went on to criticize the ICI for failing to bring that information to the attention of the Securities and Exchange Commission
Fink, a 33-year veteran of the mutual fund business, retaliated by saying the Journal had completely misread the language used on the call. "The purpose of the call was to identify effective ways to restrict market timing not to facilitate it," he said. "One of the major subjects discussed on the call was whether the ICI should ask the SEC for the authority for funds to have additional tools to curtail market timing." He added that whatever words members used, whether it was "restrictions," "arrangements," "method" or "deal," they all meant the same exact thing.
Fink also told the audience that the ICI sent a letter less than eight weeks later, requesting the SEC to authorize delaying exchanges as another way to fight market timing. "Fund groups have sought to employ a number of methods to try to deter market timing such as imposing redemption fees, limiting frequent trading and restricting frequent trading," Fink quoted the letter as reading. He called the newspapers portrayal of ICI investor protection efforts as a method of facilitating rapid short term trading as "sadly paradoxical, indeed even a bit Orwellian."
No Bidding Here
However, he warned that two rules being considered, if adopted, could drive away talent from the mutual fund business: requiring compensation disclosure for all mutual fund managers and that all fund advisory contracts be put out for bidding. "The risk of a brain-drain now is real, not fanciful," Fink said. He cautioned that this could result in fewer new firms entering the fund business and make the industry less entrepreneurial, less creative and less competitive.
As he left the stage for the last time as ICI president, a position he held for the last 13 years, Fink drew a standing ovation from its members.