Compliance

A new advocacy group aims to tackle the consumer with a media campaign to explain the differences between advisers’ fiduciary standard of care and brokers’ suitability standard. The organization announced its formation yesterday. Calling itself The Committee for the Fiduciary Standard, it plans to launch a month-long campaign at some point in the near future.

Hedge funds appear to be on track to deliver returns of 6% or better in the second quarter, their best quarterly performance since 2000, Merrill Lynch analysts project.

While Fidelity Investments agrees with most of the Securities and Exchange Commission’s proposed changes to money market funds, it doesn’t want to see “radical changes” to the asset class, a spokesman told The Wall Street Journal.

Assets under management are down for nearly all firms due to market depreciation. And making matters worse, most funds have also been hit with steep outflows. According to Strategic Insight, only about 22% of equity mutual funds had inflows for at least four of the last five months of 2008. But a few firms have actually seen positive flows over the past year.

Regulatory leaders are questioning whether changes need to be made to target-date funds after several 2010 funds reported huge losses last year, but mutual fund industry leaders say these concerns are overblown.

Regulators are searching for ways to make money market funds stronger without inadvertently crippling the $3.7 trillion industry, but reaching that delicate balance will require compromises from both sides.

After years of the court system siding with the mutual fund industry on the discrepancy between retail and institutional mutual fund fees, the case that the Supreme Court will hear this fall, Jerry N. Jones et al. v. Harris Associates, might be a watershed one for investors.

The Federal Reserve Thursday extended a number of emergency funding facilities from the end of October until Feb. 1, including an asset-backed facility for money funds, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility.Other extended programs are the Commercial Paper Funding Facility, the Primary Dealer Credit Facility and the Term Securities Lending Facility. Along with this, the Fed is extending swap lines with other central banks through Feb. 1, citing the continued strain on many capital markets. "Conditions in financial markets have improved in recent months, but market functioning in many areas remains impaired and seems likely to be strained for some time," the Fed said in a statement.

Hedge funds must reshape themselves to regain investors’ trust and continue to grow, speakers at the Managed Funds Association Forum this week said.

The Securities and Exchange Commission met Wednesday to discuss various changes to money market funds to safeguard them from another “run on the bank” like what happened last September with the Primary Fund.

The Financial Industry Regulatory Authority is asking brokers and registered investment advisers to provide it with information on the sale of leveraged and inverse exchange-traded funds between Oct. 1, 2008 and March 30 to investors who held them for 10 business days or longer. The authority is looking for all sales and marketing materials, customer communications and complaints, arbitration claims and written supervisory procedures regarding the sale of such funds.

While the financial services industry largely embraced most of the Obama administration's financial services overhaul, the idea of removing money funds' $1 net asset value is causing widespread concern in the mutual fund industry.

The Financial Industry Regulatory Authority has fined seven firms a total of $184,500, including $80,000 for Tulsa-based BOSC Inc., for failing to timely or accurately report municipal securities, unfairly pricing bonds, as well as other muni and non-muni rule violations.

At the hearing on target-date funds that the Department of Labor and the Securities and Exchange Commission held in Washington last Thursday, the focus was on better disclosure of holdings.

WASHINGTON - Many investment industry leaders are worried that the proposed 401(k) fee disclosure regulations currently being pushed through Congress will actually increase the fees investors pay and increase their confusion.

UAT Inc. has developed a 401(k) tool for sponsors offering target-date funds that will allow them to scrutinize the holdings and glidepath of the funds.

Hedge funds were spared disclosure requirements in the financial overhauls proposed by the Obama administration, and that is definitely due to the industry’s stepped-up lobbying efforts, The Wall Street Journal reports.

The mutual fund industry is willing to cooperate with the Securities and Exchange Commission and the Financial Industry Regulatory Authority on point-of-sale disclosures to investors, as President Obama has proposed, said Investment Company Institute President Paul Schott Stevens.

The Securities and Exchange Commission will continue to focus on mutual fund oversight, Chairman Mary Schapiro told the New York Financial Writers Association.

At the hearing on target-date funds Thursday, target-date fund managers, along with the Investment Company Institute, asked the Securities and Exchange Commission to butt out of asset management.ICI General Counsel Karrie McMillan said interfering in the mix of assets would be unprecedented: “In the 70-year history of mutual fund regulation, the government has never regulated the investment choices of mutual funds. Nor should it start now.”“We strongly oppose any efforts to regulate the glide paths or other aspects of the investment design or construction of target-date funds,” concurred John Ameriks, a Vanguard principal.Fund executives also said they were opposed to labeling target-date funds conservative, moderate or aggressive, based on the mandate of their glide path and current holdings.But SEC Chairman Mary Schapiro countered that target-date fund losses last year ranged from minus 3.6% to minus 41%, with an average loss of 25%. “These varying results should cause all of us to pause and consider whether regulatory changes, industry reforms or other revisions are needed with respect to target date funds.”Financial planners who testified Thursday tended to agree with the SEC that a target-date fund’s name should give some indication of its level of equity and other risk exposure. “The name of each fund must bear some relationship to the way the fund is managed, that is, its glide path,” said Joseph Nagengast of Target Date Analytics, which provides benchmarks for target-date funds. “If a fund labeled 2010 is really targeted to land at 2040, it should be relabeled as a 2040 fund.”