The mutual fund industry has done a good job of lobbying against a self-regulatory organization (SRO) and hasn’t done anything wrong enough to incite the Securities and Exchange Commission to form one, Reuters reports.

The proposal, brought up by former SEC Chairman Harvey Pitt before his resignation, designed to expose the industry to more watchdogs, has won few supporters.

"I don’t sense that we need to do it right now," SEC Commissioner Roel Campos told Reuters, adding that he viewed a mutual fund SRO "a last resort."

When SEC Chairman Pitt first presented the idea in an open hearing Feb. 4, he emphasized how taxed the SEC has become overseeing 5,000 investment companies and 7,800 investment advisors (see MFMN 02/10/03). "Like cops on a best, we cannot be everywhere at all times," Pitt said.

The fund industry is now regulated by the SEC under a comprehensive 1940 statute. "The problem that the SEC has faced over the years has been a lack of resources to inspect both the advisors and the funds," said David Ruder, SEC chairman from 1987 to 1989. "The primary reason for having an SRO would be to leverage the Commission’s resources so that someone else would do the inspections."
But the idea met cold shoulders within the industry. "We are extremely skeptical about the benefits of an SRO as an alternative to direct SEC regulation of mutual funds," said John Collins, a spokesman for the Investment Company Institute.


The staff of Mutual Fund Market News ("MFMN") has prepared this capsule summary based on a Reuters report. Reuters is not associated with MFMN, and has not prepared, sponsored, endorsed, or approved this summary.

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