Most mutual fund insiders are taking financial services reform in stride, but the final bill does contain some provisions that change they way fund firms do business in the future,

Though little is reported to be in the financial reform package passed this week on Capitol Hill (see CBS MarketWatch), there are some provisions that fund industry insiders should be watching. Morningstar's coverage of the bill highlighted one of those provisions [download conference version of bill, pdf].

The bill calls for the study of mutual fund performance ads as part of a Congressional effort to find ways in which legislators can put the kibosh on potentially misleading or incomplete ads for mutual that could mislead investors.

The language first appeared in the House version of the bill (though not the Senates) and has survived the reconciliation process (see Section 917).

Meanwhile, CBS MarketWatch finds that asset management may be one of the few sectors in financial services to come through mostly unscathed.

Robert Lee, an analyst at Keefe, Bruyette & Woods, points to the provision that makes brokers into fiduciaries as one of the few changes that could change asset managers business models.

Lee's research note said that fund firms would still be able to pay commissions to reps and that their selling agreements would not have to change, though they would have to disclose the payments.

He posited that larger fund firms with more resources to take advantage of the changes would likely be the biggest beneficiaries,

The "Volcker" rule in the bill would also impact fund firms that are part of a bank holding company, including Franklin Resources and BlackRock. Other fund firms, such as T. Rowe Price, may own banks and also see changes in how they can use their own capital in new products.

The House voted on the bill Wednesday and the Senate is expected to vote the week of July 12, according to the report. That means the bill will miss its initial signing target of July 4. 

Edited by: Sean Hanna, Editor in Chief


Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE