6.2.2009 SEC Chairman Mary L. Schapiro testified before the Senate Committee on Appropriations Subcommittee on Financial Services and General Government that she has asked the staff of the Division of Investment Management to prepare a recommendation on Rule 12b-1 under the Investment Company Act of 1940. That rule permits mutual funds to use their assets to compensate broker-dealers and other intermediaries for distribution and servicing expenses. She testified that investors do not clearly understand the rule. She noted that in 2008, 12b-1 fees amounted to more than $13 billion in investors’ funds.
Consequently, she stated that the SEC will engage in a comprehensive re-examination of Rule 12b-1 and the fees collected pursuant to the rule. She concluded on this subject by saying that “if issues relating to these fees undermine investor interests, then we at the SEC have an obligation to step in and adjust our regulations.”
She also stated that later in June, the SEC will consider proposals to revise the money market fund regulatory regime. The proposals will focus on tightening the credit quality, maturity and liquidity standards for money market funds to better protect investors and make money market funds more resilient to risks in the short-term securities markets. In addition, the SEC is considering whether more fundamental changes are necessary, such as converting money market funds to a floating rate net asset value.
Chairman Schapiro testified on a number of other topics as well.
Click http://www.sec.gov/news/testimony/2009/ts060209mls.htm to access Chairman Schapiro’s testimony.