[11008]
May 25, 1999
TO: BOARD OF GOVERNORS No. 39-99
PRIMARY CONTACTS - MEMBER COMPLEX No. 57-99
RE: ICI 1999 GENERAL MEMBERSHIP MEETING SPEECHES
______________________________________________________________________________
John J. Brennan, Chairman of the Institute’s Board of Governors, and Institute President
Matthew P. Fink spoke at the Institute’s 1999 General Membership Meeting. Copies of their speeches
are attached, and they are summarized below.
Chairman's Report
Mr. Brennan’s report focused on the industry’s accomplishments, challenges, and opportunities
during the past year. He stated that 1998 was an impressive year of accomplishment for the industry in
terms of its expanding client base, growing assets, and significant cash flow.
Mr. Brennan noted that the industry successfully met the challenges it faced last year, namely
volatile markets, the lure of day trading, educating investors, and scrutiny from regulators and legislators.
In particular, Brennan noted that “[w]ith respect to our governance structure and practices, the past 12
months saw the most scrutiny in years on the role of boards of directors in the mutual fund industry.”
Brennan applauded the challenge laid out by SEC Chairman Levitt’s inquiry into the role of independent
directors as a great “complacency check” for the industry. Brennan warned against assuming that our
unique system of governance cannot be improved, and stated that the industry has the burden “to
constantly review and improve the stewardship of our shareholders’ assets.”
With respect to the opportunities of 1998, Chairman Brennan highlighted the increasing
importance that Americans are placing on retirement savings. He urged the industry to work with
elected officials to help shape the legislative and regulatory future for savings and retirement. Finally,
Brennan cautioned the industry not to dwell on its accomplishments for too long, but to respond to
existing challenges and anticipate new ones to ensure the industry’s continued success.
President’s Report
Mr. Fink’s report emphasized that the continued success of the mutual fund industry is
dependent upon continuing its tradition of integrity, and highlighted several things that the industry
must do to ensure that it maintains this integrity.
First, Mr. Fink stressed that the industry must “remain unwavering in [its] support for the core
fiduciary provisions of the Investment Company Act, and resist siren calls for their dilution or
elimination.” In noting that this support requires periodic reexamination of the core protections, Fink
reported that the Institute formed an Advisory Group to consider best practices for fund directors. He
stated that “[i]t makes sense to examine current best practices to see if they can be made even better, and
we are pleased to be part of Chairman Levitt’s initiative for a careful and thorough review of this central
element of our regulatory system.”
Mr. Fink next warned that the industry must keep apprised of changes and propose new laws,
regulations and voluntary measures to directly address new issues. Towards that end, Fink noted that
the Institute submitted a series of recommendations to the SEC “to modernize the rules governing
affiliated transactions without diluting the effectiveness of the Act’s bans on self-dealing.” Mr. Fink also
urged continued regulation of the industry by the SEC. Fink stressed that co-regulation with the Office
of Thrift Supervision and the Comptroller of the Currency would lead to duplicative and conflicting
regulation, and applauded Congress for recognizing the important role of SEC regulation.
As a fourth point, Mr. Fink urged the industry to challenge myths and misinformation
concerning problems that do not exist, but serve to divert attention from real issues and concerns. In
particular, Fink noted the perennial fallacy that mutual fund fees are rising, when in fact the total cost to
shareholders of owning mutual fund shares has fallen during the past two decades. President Fink also
stressed that the industry must ensure that regulatory requirements help investors make informed
decisions. For example, Fink noted that not all employers provide complete information about
investment options in defined contribution plans, and emphasized that the industry “must continue to
urge the Department of Labor to require every sponsor of every 401(k) plan to provide every employee
with full disclosure about every investment option.”
Finally, Mr. Fink reminded the industry to remain committed to the education of investors, as
well as all of the men and women who work in the industry.
Doretha VanSlyke Zornada
Assistant Counsel
Attachments
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ICI Library at (202) 326-8304, and ask for attachment number 11008. ICI Members may retrieve this Memo and its
attachment from ICINet (http://members.ici.org).