- Fund Regulation
- Retirement Security
- Trading & Markets
- Fund Governance
- ICI Comment Letters
Statement of the Investment Company Institute On the Consolidation of NASD and the Regulatory Functions of the NYSE: Working Towards Improved Regulation
Submitted to the Subcommittee on Securities, Insurance, and Investment Committee on Banking, Housing, and Urban Affairs United States Senate
May 17, 2007
Chairman Reed, Ranking Member Allard, members of the Subcommittee, the Investment Company Institute (ICI), the national association of U.S. investment companies, commends the Subcommittee on Securities, Insurance and Investment for holding this important hearing to examine the consolidation of the NASD and NYSE member regulation operations into a new, independent self-regulatory organization (“SRO”).
ICI members include 8,826 open-end investment companies or “mutual funds,” 666 closed-end funds, 398 exchange-traded funds and four sponsors of unit investment trusts. Mutual fund members of ICI have total assets of approximately $10.634 trillion, representing 98 percent of all assets of U.S. mutual funds. These funds serve approximately 93.9 million shareholders in more than 53.8 million households.
Investment companies and their shareholders have an enormous stake in the regulatory structure overseeing the securities markets. For this reason, ICI strongly supports the proposed NASD-NYSE consolidation. We believe it will benefit both investors and the securities industry as a whole. By eliminating overlapping regulation, establishing a uniform set of rules, and placing oversight responsibility in a new, independent self-regulatory organization, the consolidation should increase the efficiency and consistency of securities industry oversight, help strengthen investor safeguards, and reduce overall regulatory costs. The consolidation also will facilitate streamlined regulation - making it more efficient, more effective and more responsive.
ICI welcomes the prospect of the single set of rules that will be adopted when the new SRO is in place and fully integrated. As is the case with the SEC, these rules should be crafted to protect investors as well as promote efficiency, competition and capital formation that benefit the investing public. We therefore believe it is critically important, as the new SRO works to consolidate and harmonize current NASD and NYSE rules into a single set of rules, that it consider the relative costs and benefits of those rules. To ensure that regulatory proposals by the new SRO are subject to such analysis, the SEC by rule, or Congress by law, should require that all self-regulatory organizations perform a formal cost/benefit analysis prior to submitting regulatory proposals to the SEC. We urge the Subcommittee to support this recommendation.
We also note that the new SRO’s governance structure would require that one of the “Industry Governors” be associated with an “investment company affiliate.” ICI agrees that the governance structure of the new SRO will benefit from the views and insights of funds. We would welcome even greater representation of funds and other institutional investors in the governance of the new SRO, if that is feasible.
ICI commends NASD, NYSE Regulation and the Securities and Exchange Commission for their commitment and hard work in ensuring the successful completion of the proposed consolidation. We look forward to working with the new SRO on issues impacting funds and investors.