MutualFundWire.com: Fund Regulator Shares 10 Lessons

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Monday, March 8, 2004

Fund Regulator Shares 10 Lessons

SEC Commissioner Cynthia A. Glassman shared her “Top 10 Observations as an SEC Commissioner” on Friday before the Practising Law Institute.

In the remarks, she addressed several hot topics, including investigations, reinterpretation of rules, and fee disclosure. She prefers the carrot to the stick but has seen fear work as a powerful motivator of good behavior. When the status quo stops working, she thinks it becomes necessary to change the rules.

She thinks regulatory bodies that have the power to make changes need to be diligent in crafting rules that constitute real solutions and not window dressing.

“Writing rules is easy,” she said. “Writing good rules is hard.” Especially when regulators feel, as she sometimes does, that they are “being asked to be a referee among competing business interests.”

Glassman acknowledges the difficulty of educating investors and translating legalistic fee terms into everyday language, but says that it will ultimately be worth the effort. She warns against obfuscation of any kind. And finally, she counsels the prudent to always cooperate fully with the SEC.

Her “Top 10 Observations” were:

Just because that’s the way it has always been done, doesn’t make it right now.

We shouldn’t write rules just because we can.

We can’t legislate ethics, but we can motivate people to do the right thing.

Complexity and lack of transparency hide problems.

Every sector in this business has an agenda.

We at the Commission can’t please everyone, nor should we try.

Money is money -– a fee by any other name is still a fee.

Developing clear, concise and informative disclosures is very hard.

Survey after survey shows that investors at all stages of life are woefully lacking in the knowledge needed to make sound investment decisions.