©2006 Investment Company Institute. All rights reserved. Information may be abridged and therefore incomplete.
Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice.
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December 11, 2006
TO: BOARD OF GOVERNORS No. 29-06
BROKER/DEALER ADVISORY COMMITTEE No. 48-06
BROKER/DEALER ASSOCIATE MEMBERS No. 6-06
CEOS
CLOSED-END INVESTMENT COMPANY MEMBERS No. 59-06
COMPLIANCE MEMBERS No. 50-06
SMALL FUNDS COMMITTEE No. 31-06
UNIT INVESTMENT TRUST MEMBERS No. 27-06
SEC RULES MEMBERS No. 106-06
RE: 2006 SECURITIES LAW DEVELOPMENTS CONFERENCE SPEECHES
On December 4th and 5th, Paul Stevens, The Institute’s President, Andrew Donohue, Director
of the Division of Investment Management of the SEC, Brian Cartwright, General Counsel of the SEC,
and Lori Richards, Director of the Office of Compliance, Inspections and Examinations of the SEC,
delivered speeches at the Institute’s 2006 Securities Law Developments Conference. Their remarks are
briefly summarized below, and links to the full text are provided.
Remarks by Mr. Stevens
Mr. Stevens focused on the importance of analyzing the relative costs and benefits of
regulations, and the mandate in the securities laws that the SEC evaluate the effects of regulation on
efficiency, competition, and capital formation. He stressed that the Institute supports strong regulation
and SEC oversight, but recommended that the regulator pause and reflect on investment management
regulation after the past seven years of accelerated rulemaking activity. Mr. Stevens highlighted two
types of regulation that have brought higher costs and compromised the competitiveness of mutual
funds: those with costs that are disproportionate to their benefits, and those that impose burdens
uniquely on mutual funds and not on similar investment products. Mr. Stevens closed by expressing his
confidence that regulators and political leadership can strike the right balance to protect investors and
the health of the American financial markets.
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Mr. Stevens’ remarks are available on the ICI website at
http://www.ici.org/home/06_seclaw_stevens_spch.html.
Remarks by Mr. Donohue
Mr. Donohue outlined the Division of Investment Management’s priorities for 2007. He
discussed the challenges associated with the SEC’s mutual fund disclosure reform and interactive data
initiatives, and commended the Institute for its leadership in this area. “The goal is giving investors the
information they need, in a form they can use,” he said. Mr. Donohue also outlined steps the Division
is taking to improve the efficiency of exemptive application processing. In addition, he spoke about the
fiduciary culture of the fund industry, urging fund managers to continue to focus on the investor. “The
fiduciary culture is integral to the fund industry, and is one of the true strengths of mutual funds.”
Mr. Donohue’s remarks are available on the SEC’s website at
http://www.sec.gov/news/speech/2006/spch120406ajd.htm.
Remarks by Mr. Cartwright
Mr. Cartwright’s remarks focused on the competitiveness of the mutual fund marketplace. He
noted that the market is not highly concentrated. He suggested that efficient markets ought also to
obey the “law of one price,” which states that nearly identical products should sell for nearly identical
prices. Mr. Cartwright maintained that this is not the case in the mutual fund marketplace, as expenses
vary widely across what he deemed to be comparable funds, such as index funds based on a common
index. He asserted that this disparity may be more apparent in actively managed funds. Mr. Cartwright
concluded by encouraging the industry to participate in searching for ways to improve the
competitiveness of the mutual fund market.
Mr. Cartwright’s remarks are available on the SEC’s website at
http://www.sec.gov/news/speech/2006/spch120406bgc.htm.
Remarks by Ms. Richards
Ms. Richards began by discussing the SEC’s “CCOutreach” program. She shared her view that
the SEC staff and fund and adviser compliance professionals have a shared mission to ensure that
companies are in compliance and that investors’ interests are protected. Ms. Richards stressed that the
goal of the CCOutreach program is to work with compliance professionals to strengthen compliance
regimes, and described some of the themes that have emerged in the program seminars. Ms. Richards
shared the inspections staff’s observations on how firms have been implementing the annual review
component of the compliance rule. She described the factors that SEC examiners consider in
evaluating annual reviews, and the scope of the reviews conducted by the 60 percent of firms found to
have completed the process satisfactorily. She also outlined the deficiencies found at the other firms.
Ms. Richards concluded by expressing her hope that dialogue between the SEC staff and compliance
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professionals through the CCOutreach program will help improve compliance programs for the benefit
of mutual fund investors.
Ms. Richards’ remarks are available on the SEC’s website at
http://www.sec.gov/news/speech/2006/spch120506lar.htm.
Elizabeth Krentzman
General Counsel