Roye Successor to Inherit a Number of Challenges

Challenges abound for the successor to Paul Roye, the Securities and Exchange Commission's outgoing director of the investment management division, MarketWatch reports. The division, which oversees the mutual fund industry, has been in the spotlight for some time now, owing to the wave of scandals that have hit the fund industry.

Potential candidates for the job include Jay Barris, a partner with the New York-based firm Kramer Levin Naftalis & Frankel, Jack Murphy, an attorney with Dechert LLP in Washington, Henry Hopkins, chief counsel at fund giant T. Rowe Price Group, and Martin Lybecker, a partner at Washington law firm Wilmer Cutler Pickering Hale and Dorr.

The SEC declined to comment on the search, saying it's too early to disclose potential appointments.

Regardless of who the new appointee is, he or she would be responsible for finalizing some basic SEC proposals on preventing mutual fund trading abuses, which were unearthed by New York Attorney General Eliot Spitzer in late 2003.

Under Roye's watch, the SEC has been toying with the idea of imposing a 4 p.m. "hard close" deadline to prevent late trading. There have also been talks about charging redemption fees to investors who hold shares for less than five days, so as to curtail excessive trading.

Roye's successor would be confronting a growing disagreement between the SEC and the fund industry over a controversial rule requiring fund boards to seat independent chairman. Another issue gaining momentum is the problem of fund disclosure, which the SEC says should be made easier to understand for investors. Yet a further area that needs work is the disclosure of revenue-sharing arrangements, where fund companies pay brokers to sell their funds to their clients.

The SEC's chummy relationship with the Investment Company Institute, the mutual fund industry's main trade group, came under attack by Spitzer, but the relationship has strained in the aftermath of the trading scandals. Roye's successor would be expected to renew relations with the ICI.