Modernizing SEC Regulation

Matthew P. Fink

in The Rise of Mutual Funds

Second edition

Published in print January 2011 | ISBN: 9780199753505
Published online January 2012 | e-ISBN: 9780199918805 | DOI:
Modernizing SEC Regulation

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This chapter discusses the modernization of mutual fund industry regulation. The explosive growth of and dramatic changes in the mutual fund industry during the 1980s and 1990s led the Securities and Exchange Commission (SEC) and the industry to seek to modernize SEC requirements in the areas of disclosure, substantive regulation of fund activities, and fund compliance with law and regulation. Disclosure requirements relating to fund prospectuses, shareholder reports, advertisements, and newsletters were updated (although disclosure of “shelf space” went unaddressed). Similarly, a number of SEC substantive rules and industry best practices in areas such as permissible investments by money market funds, 12b -1 plans, personal investing by fund managers, and the independence and effectiveness of fund directors were improved. In the area of compliance, the SEC did not adopt the industry's recommendation to require funds to establish formal compliance systems. Moreover, the SEC transferred oversight of its own inspections of mutual funds from the division responsible for fund regulation to a separate new unit, a step which many observers believe has harmed compliance.

Keywords: mutual fund industry regulation; mutual funds; Securities and Exchange Commission; disclosure requirements; best practices; compliance

Chapter.  13039 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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