The modern American mutual fund industry is a transparent, durable diamond, not a legion of shadow bankers.

That's the message this morning conveyed by Investment Company Institute (ICI) general counsel David Blass in his opening remarks at the 2015 Mutual Funds and Investment Management Conference at the J.W. Marriott Desert Springs resort in Palm Desert, California. In the prepared text of his speech titled "The Modern Fund Industry at 75," Blass reflects on the mutual fund industry's diamond (from the Greek word meaning "unbreakable") anniversary, celebrating the passage of the Investment Company Act of 1940 and the Investment Advisers Act of 1940 and the creation in 1940 of what is now the ICI. Blass also touches on three key issues that he sees shaping fundsters' world "for years, if not decades, to come."

"What an appropriate symbol for the modern fund industry," Blass says early on in his speech. "A diamond embodies immense strength, resilience, and durability -- much the same as regulated funds."

Blass, an SEC veteran who joined the ICI last year, praises SEC Chair Mary Jo White's regulatory efforts and comments. He contrasts White with banking regulators, who often call fundsters shadow bankers and who are fighting to try to impose banking-like, risk-minimizing regulations on the mutual fund industry.

"The real risk is that the capital markets themselves will come under bank-like regulation -- putting the SEC's mandate of investor protection, capital formation, and efficient functioning of the markets in conflict with bank regulators' desire to see risks eliminated, or at least dramatically reduced, in order to promote the safety and soundness of large banks and other designated financial companies," Blass warns. "And this risk is real."

Blass also offers words of caution about an SEC sweep called "Distribution in Guise," remarking that any so-called "hidden" distribution fees in mutual funds would have to be "hidden in plain sight." He urges the SEC to leave "discretion on oversight of payments to intermediaries in the capable hands of fund directors and trustees."

"Upholding this tradition is very important," Blass says. "To do otherwise, to dismiss directors' business judgment, would undermine their critical role. It would also override many years of sound legal interpretation in this area." 

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