Advocates of a market-dictated approach to fund fees have found an unlikely ally in Paul Roye.

Roye, a former director of the Securities and Exchange Commission’s investment management division, said at a conference sponsored by the American Law Institute-American Bar Association earlier this month that the oversight of fund fees should fall in the hands of the market and not fund directors. A summary of his speech was carried by InvestmentNews.

In particular, Roye called for the withdrawal of Section 36(b) of the Investment Company Act of 1940, which states that investment advisers of investment companies "shall be deemed to have a fiduciary duty with respect to the receipt of compensation for services or of payments or of payments of a material nature…"

The absence of clear guidelines for setting fees have resulted in many a lawsuit accusing fund directors of charging exorbitant fees, noted Roye, who is now a senior vice president at Capital Research and Management.

Stripping fund boards of their oversight function, he said, would result in a simpler framework for mutual fund fees.

His suggestions did not end there. Roye also proposed removing 12(b)-1 fees and putting in place a single unified fee that would be reported to investors. 

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