Regulation

SEC Governor Cynthia Glassman once again spoke out vehemently against the Commission's new rule that will require fund boards to have independent chairmen. "This debate is not over," she said, referring to a lawsuit that the U.S. Chamber of Commerce has brought against the SEC and a request by Congress for the Commission to look at the effects of the new rule.

Soon to retire Sen. Peter Fitzgerald (R-Ill.) recently applauded the efforts of federal securities regulators for their continuing efforts to enact a series of mutual fund reforms that benefit individual investors.

The NASD has come down on 29 broker/dealers for more than 8,000 instances of failing to disclose reportable information to customers. The firms have neither admitted to nor denied allegations, but consented to the entry of the findings. Reportable information includes customer complaints, regulatory actions, criminal charges and convictions.

Two attacks on the SEC's requirement for independent board chairmen are unlikely to topple the hotly contested rule, industry insiders say, and like it or not, funds run by outsiders could find their fees, and therefore their profits, reduced. But one ploy that could result would be a delay past the current Jan. 16, 2006 deadline for funds to install independent chairmen.

Paul Roye, director of the SEC's division of investment management, recently indicated that clearly defining what can be exchanged between brokers and fund companies through soft dollars will be a priority of the Commission in 2005. Speaking before the Consumer Federation of America, Roye said that this will be a "front-burner" priority, one that will probably be resolved by limiting the definition of "research."

Securities regulators have launched an informal probe of mutual fund and brokerage firms to determine whether brokers doled out lavish gifts to attract trading business.

The NASD has barred James B. Moorehead, a former broker with AmSouth Investment Services, from the securities industry for life for alleged fraud, forgery, and falsification of documents in connection with variable annuity sales.

The Securities and Exchange Commission's formal dealings with mutual fund companies reportedly will continue into next year if the Commission follows through on plans to punish investment firms for failing to provide mutual fund board members with vital information.

ORLANDO, Fla. -- Speaking at the 2004 Operations Conference and Service Provider Exhibition here, Investment Company Institute President Paul Schott Stevens stressed the importance of funds and their operations support working together with regulators and the media to redefine the culture of the mutual fund business in the wake of the largest scandal in its history.

NEW YORK -- While corporate governance in the financial services industry has improved markedly over the past year, unsettled problems such as high executive compensation and continued conflicts of interest must be rectified, a top Ernst & Young executive said last Tuesday. The resulting tightened regulation combined with heightened competition from separately managed accounts and alternative investments for high-net-worth investors, is going to mean an especially competitive landscape in the year ahead, he said.