Cynthia Glassman, SEC commissioner, voiced her doubts about fund reform proposals to a conference audience in Washington D.C. on Monday, the Wall Street Journal reported.

She shot down pending proposals requiring independent directors, a two percent redemption fee, and the much-hated 4 p.m. hard close.

Specifically, Glassman said "I continue to have concerns' [regarding the director proposal]," the WSJ reported Glassman as stating in prepared remarks.

The agency will vote on the proposal, which will require three-quarters of a fund's board to be independent and be chaired by an independent director, later this month.

Regarding the anti-market timing redemption fee, Glassman stated in prepared remarks "[i]t's not clear that this rule is needed at this time," the WSJ reported. She characterized the redemption fee as a "stop-gap measure and one that can be easily gamed. The real problem is stale pricing, which can only be solved by fair value pricing."

Glassman suggested tamper-proof time stamps, more compliance requirements, and audits as possible alternative solutions to a hard close requirement. The commissioner noted that she had not reached a final decision on the issue, but that her "current inclination is...to let the markets sort out the best way to accomplish them."

One SEC requirement that Glassman expressed support for is the independent compliance officer rule, which is no longer up for debate. The rule goes into effect on October 5.

The commissioner betrayed her attitude towards the fund scandals, siding with the school that characterizes problem firms as a few bad actors: "[m]oral lapses and shady practices at a few firms can rock investor confidence in an entire industry."

Glassman also warned the audience, assembled for a National Association of Variable Annuities conference, that the SEC would target sales of variable annuities in the next few months.

She concluded her speech by urging industry to "heal thyself."  

Edited by: Theresa Sim


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