WASHINGTON Paul Roye, the Securities and Exchange Commissions director of the division of investment management, issued a wakeup call for the mutual fund industry, telling attendees that the industrys place in the market is not assured, during remarks at the Investment Company Institutes annual convention here Friday.
Roye told the history of the demise of the once-dominant railroad industry in the U.S., drawing obvious parallels to the fund industrys problems and those that led to the downfall of the rail industry. He said over-regulation, the railroads slow moving political nature and the fact that it didnt care about its customers were all contributing factors. "The mutual fund industry must be mindful that its place in the economy is not guaranteed," Roye said.
Suggesting the mutual fund industry redouble its efforts to be proactive, Roye acknowledged that the fund industry does have a history of being proactive. He also said it is up to the industry to self-police and not "stick its head in the sand. Just because an activity may be legal doesnt mean its appropriate." He said that the commission is skeptical about implementing a self-regulatory agency and urged the industry to keep in mind that whats best for the investor is best for the industry. He suggested that regulators and fund companies alike should do their best to make sure investors get a fair deal.
Roye also urged industry input about whether or not hedge-like strategies should be opened to retail investors.