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Fund industry fights systemic-risk regulation 

May 23, 2014
Trevor Hunnicut, Investment News

A trade group for fund companies launched a broadside against regulators who are considering designating some large fund managers as potential sources of disruption in financial markets.

Mutual fund companies and Paul Schott Stevens, who leads their trade association the Investment Company Institute, expanded their argument about what harms might occur for advisers and retail investment advisers if funds are designated a SIFI, or systemically important financial institution.

Under a potential rule, “the Fed could substitute its ‘prudence’ for the fiduciary judgment of a SIFI-designated fund’s investment adviser,” according to Mr. Stevens, who spoke Tuesday at the ICI’s annual conference in Washington. "During times of market turmoil, for example, the Fed might impel a fund to maintain financing for a troubled bank, even the fund manager were to conclude that holding that position is not in the best interests of the fund’s shareholders.”

Read more: Investment News

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