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Speak Up or Live with the SEConsequences

by Lee Kowarski

Asset management firms need to speak out about the administration's proposal to give the SEC the power to create "rules prohibiting sales practices, conflicts of interest, and compensation schemes for financial intermediaries...that it deems contrary to the public interest and the interests of investors." The full text of the proposed regulation is available in a PDF document on the Treasury Department's Web site.

Managers should be very concerned about the lack of specificity in the July 10th proposal. However, as Ignites pointed out yesterday, the industry has remained silent on this topic. As currently worded, the Commission would be given free reign to limit and potentially eliminate, revenue sharing, sales loads, commissions, and possibly other pieces of the industry's current financial structure.

Personally, I am opposed to the SEC acquiring any additional fee-setting powers. I believe that such issues are better addressed through clear and easy-to-understand disclosure, and would prefer to see the Commission focus that rather than their current notion of "the public interest". That said, asset management firms - either through the ICI or individually - must articulate their position on this critical topic. Companies should speak out loudly and quickly in order to influence this legislation and ensure that they, and their distribution partners, retain the flexibility needed to be profitable businesses.