5.4.2009 Commissioner Troy A. Paredes spoke at the Mutual Fund Directors Conference and praised the mutual fund industry for the many offerings it provides to investors, which allow for tailored portfolios, the chance to earn higher returns, and diversification. The Commissioner stated that the marketplace, not a regulator, is the best place to test a new product and that “with adequate disclosure, investors remain best-equipped to decide how to allocate their capital.” The Commissioner counseled that lawmakers should not overreact to bad marketplace events but should use “balance” in considering enhancements. With regard to credit agencies, the Commissioner counseled that “[o]verreliance on ratings is part of the problem.” And, “[t]hat a fund can hold a particular asset with an investment grade rating, for example, does not mean that the fund should hold the asset as a business matter, particularly if the rating quality is in doubt.” The Commissioner then gave three points of advice: “First, adequate market discipline can obviate the need for more exacting and burdensome regulation . . . Second, courts are not well-positioned to second-guess the business decisions that boards or others in business make in good faith . . . Third, although it is possible to adhere too tightly to the status quo, the legitimate interest of predictability should receive considerable weight when evaluating the merits of a legal change.” The Commissioner concluded by emphasizing that the SEC needs more industry people, rather than lawyers, and that it is making strides towards that goal.

Click http://www.sec.gov/news/speech/2009/spch050409tap.htm to access Commissioner Paredes’ full remarks.