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Statement of the
Investment Company Institute
U.S. Securities and Exchange Commission’s Appropriations
for Fiscal Year 2009
Submitted to the Subcommittee on
Financial Services and General Government Committee on Appropriations
U.S. House of Representatives
April 30, 2008
The Investment Company Institute1 appreciates this opportunity to submit testimony to the Subcommittee in support of the Administration’s FY 2009 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.
Registered investment companies 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 and other registered investment companies has more than quadrupled. Today, almost 90 million investors in more than 50 million U.S. households own shares of registered investment companies; the median household income of these investors is $73,400. 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 and other registered investment companies.
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 2009 budget proposes SEC funding at a level that represents a slight increase over the past three years, in which the SEC’s budget has remained largely flat. SEC Chairman Christopher Cox explained in his testimony that this would permit the SEC to keep staffing on par with FY 2007 levels. The SEC believes that this level of funding is necessary to fulfill its regulatory mandate and to continue protecting the nation’s investors. We agree, and we urge Congress to provide appropriations at this funding level.
We are particularly pleased that the top strategic priority for the SEC’s Division of Investment Management will be to implement new rules under consideration by the Commission that would provide mutual fund investors with more reader-friendly disclosure.2 To its great credit, the SEC has reconceived its approach to mutual fund disclosure, putting forth a proposal that seizes upon the potential of the Internet and permits funds to use a “summary” prospectus – a short, concise, plain-English document consisting of key information about the fund, including investment objectives and strategies, risks, costs, and performance. Investors who prefer the long statutory prospectus would be able to get it (and other information about the fund) online, or have a hard copy promptly sent to them for free. Our own extensive research and the SEC's – along with the overwhelming majority of the public comments the SEC has received about the proposal – strongly suggest that this is the right approach. Accordingly, we strongly support funding for the SEC to complete 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 strongly support the continued focus on internal reforms that will improve the performance of the SEC. This includes, for example, developing closer integration of the activities of different SEC divisions and branch offices, providing regulatory guidance that better anticipates issues, and conducting empirical research that informs major rulemakings. Indeed, the importance of these kinds of reforms has been underscored in a series of reports on the competitiveness of the U.S. financial markets. 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 almost 90 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.
1The Investment Company Institute is the national association of U.S. investment companies, including mutual funds, closed-end funds, exchange-traded funds (ETFs), and unit investment trusts (UITs). ICI seeks to encourage adherence to high ethical standards, promote public understanding, and otherwise advance the interests of funds, their shareholders, directors, and advisers. Members of ICI manage total assets of $12.34 trillion and serve almost 90 million shareholders.
2See FY 2009 Budget Appendix at p. 1229.