The U.S. Securities and Exchange Commission voted 5-0 yesterday to propose that mutual fund companies no longer receive any trade orders after the 4 p.m., or appropriate, market close. This would mean tremendous change to the way fund companies accept and process orders, since intermediaries handle 87% of these orders.
The SEC also recommended that fund complexes appoint a chief compliance officer, reporting to a funds board of directors.
Politicians and regulators had mixed reactions, although New York Attorney General Eliot Spitzer said on MSNBC that the measures were "a beginning." Massachusetts securities chief regulator William Galvin told Reuters, "Theyre an O.K. first step."
Chris Wloszczyna, Investment Company Institute spokesman, characterized the proposals as "good news for shareholders" and said the ICI will continue "to work with Congress and regulators to rebuild the trust and confidence of investors." Likewise, U.S. Secretary of the Treasury John Snow issued a statement saying he was "pleased" by the SECs vote.
But other critics went further than Spitzer, including shareholder activist and FundAlarm.com publisher Roy Weitz, who said the SEC was still making only a short-term rectification. Longer-term solutions are also needed, he said.
Former SEC Chairmen Arthur Levitt and Richard Breeden wrote in a Wall Street Journal op-ed piece yesterday that "comprehensive action" is needed or the entire fund industry and the U.S. economy will suffer.
And Democratic presidential candidate, Vermont Governor Howard Dean, called upon Congress to amend the 1940 Act to state that boards have a fiduciary duty to act in the interest of investors, among other measures.
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The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
