Federal regulators must be careful not to adversely affect mutual fund companies by over-regulating them, Paul Schott Stevens, president of the Investment Company Institute, said in a testimony on Tuesday before the House of Financial Services.
Stevens lauded the efforts of the Securities and Exchange Commission in putting into place additional regulatory reforms since New York Attorney General Eliot Spitzer unearthed trading scandals in the $8 trillion mutual fund industry nearly two years ago.
Still, Stevens said, the SEC must exercise caution in implementing new reforms that might end up hurting the very investors the Commission seeks to protect. "Individually, these requirements may serve valid and useful purposes," he said, adding, "it is the totality of regulatory requirements under which mutual funds operate that gives us cause for concern."
For instance, Stevens noted, the greatest impact of regulatory overkill could be on smaller firms and new entrants, which could actually be driven out of business because of the high cost of compliance. Stevens also pointed out that "regulatory requirements that single out mutual funds versus other financial products raise additional concerns.
"No competing financial product is subject to more comprehensive disclosure, compliance and governance requirements than mutual funds are," Stevens noted, as he and other leading fund executives and regulators alike have said on numerous occasions.