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Statement of the Investment Company Institute
On the U.S. Securities and Exchange Commission’s
Appropriations for Fiscal Year 2007
Submitted to the Subcommittee on
Science, State, Justice And Commerce, and
Related Agencies, Committee On Appropriations
U.S. House of Representatives
April 27, 2006
The Investment Company Institute appreciates this opportunity to submit testimony to the Subcommittee in support of the Administration’s FY 2007 Appropriations request for the Securities and Exchange Commission (SEC). We commend the Subcommittee for its consistent past efforts to assure adequate resources for the SEC.
Mutual funds are an integral part of the U.S. economy and continue to be one of America’s primary savings and investment vehicles for middle-income Americans. Since 1990, the percentage of U.S. retirement assets held in mutual funds has more than quadrupled. Today, more than 91 million investors in nearly 54 million U.S. households own mutual fund shares; the median household income of fund shareholders is $68,700. These millions of ordinary Americans continue to recognize that mutual funds are the best means of achieving their long-term financial goals. They deserve and benefit from continued vigilant regulatory oversight of mutual funds.
In addition to their role as the investment vehicle of choice for millions of Americans, mutual funds are major investors in securities and participants in the marketplace. As such, they have a strong interest in assuring the SEC’s continued ability to soundly and effectively regulate securities offerings, other market participants, and the markets themselves.
For all of these reasons, sufficient funding of the SEC is critically important to the Institute and its members.
The Administration’s FY 2007 budget proposes SEC funding at a level of $904 million, which is a slight increase from the $888 million appropriated in FY 2006. The SEC has determined that this level provides it with adequate funding to fulfill its regulatory mandate and to continue protecting the nation’s investors. Accordingly, the Institute urges Congress to provide appropriations at this funding level.
We believe it is significant that the SEC has specifically requested funding to allow it to continue to invest resources in technology. We are particularly pleased that the top strategic priority for the SEC’s Division of Investment Management will be to revamp the mutual fund disclosure regime by making disclosures more useful to investors through better use of new technologies, such as interactive data and the Internet. 1 As SEC Chairman Cox recently noted, improving the quality of disclosure for the average investor would “empower everyday investors to make better decisions for their families, their retirement, their health care, their education and their savings.” 2 We strongly support funding for this important initiative.
While providing adequate funding is vitally important, it is equally important that the SEC deploy available resources in ways designed to assure the effectiveness of its regulatory and law enforcement efforts. We therefore support the continued focus on internal reforms that will improve the performance of the SEC. This includes, for example, providing regulatory guidance that better anticipates issues, developing closer integration of the activities of different SEC divisions and branch offices, implementing new inspection strategies, and conducting empirical research that informs major rulemakings. We support appropriate funding of the SEC to facilitate these and other initiatives to enhance the effectiveness of the SEC.
In conclusion, the SEC and the fund industry share a common objective of assuring that mutual funds remain a vibrant, competitive and cost effective way for average Americans to access the securities markets and realize their long-term financial goals. Future regulatory and oversight actions by the SEC will play a key part in this process. It is therefore critically important that the SEC have sufficient resources to enable it to be an effective and efficient regulator and fulfill its mission of protecting the nation’s investors, including the more than 91 million Americans who own mutual funds. Accordingly, we support providing the SEC with the requested level of funding.
We appreciate your consideration of our views.
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The Investment Company Institute is the national association of American investment companies. Its membership includes 8,554 open-end investment companies (“mutual funds”), 654 closed-end investment companies, 162 exchange-traded funds and 5 sponsors of unit investment trusts. Mutual fund members of the ICI have total assets of approximately $8.802 trillion (representing 98 percent of all assets of US mutual funds); these funds serve approximately 89.5 million shareholders in more than 52.6 million households.
 See United States Securities and Exchange Commission, In Brief, Fiscal 2007, Congressional Budget Request (February 2006).
 Speech by SEC Chairman Cox, Opening Remarks to the Practicing Law Institute's SEC Speaks Series, March 3, 2006.