ICI Mutual Funds Seminar Raises issue of
International Regulation

The Investment Company Institute held its annual Mutual Funds and Investment Management Conference this month in Phoenix. Fortunately, the CCH Mutual Funds Guide editor, Amy Leisinger, attended this very substantive seminar and filed a report.

In part, she reports that, in his keynote address, SEC Commissioner Paul Atkins advocated balance in the industry and the development of consistent regulation at the state, federal, and international level. He emphasized the need to focus on long-term national and international regulatory effects and global competition, especially while regulation attempts to catch up with market innovation.

International regulatory convergence was further discussed by a panel of industry leaders who considered the key differences between rules pertaining to US mutual funds and European Union mutual funds. According to the panelists, these investment vehicles are quite similar and, as a result, should be treated equally under a global regulatory approach, and regulators should do away with current discrepancies.

Jean-Marc Goy, counsel to the director general of the Luxembourg Supervisory Authority of the Financial Sector, discussed the key differences between US and EU fund regulation. He explained that the focus of UCITS regulation is more preventive than critical; no authorization to operate would be given to an entity unless the regulatory authority is satisfied with the ``whole picture,’’ meaning the entire structure of a financial organization. This approach results in fewer regulatory actions and less private litigation than the US reactive system of governance.

Andrew Donohue, Director of the Division of Investment Management, responded that enforcement is a tool that the SEC uses to get necessary information and to ensure industry compliance. If the SEC was put in the position to approve firm structure and choice of directors, he reasoned, conflicts would arise. Balance between the two approaches, however, would be something to consider, he noted. ``We should never say we have the best model,’’ he stated.