Editor's Note

April 28, 2016

By Hillary Jackson

From the Editor...

 

Have you reviewed your funds' securities lending activity lately? If not, it might be time to do so—especially if the funds you oversee are affiliated with an insurance company.

 

The Securities and Exchange Commission earlier this month began an information-gathering exercise by serving subpoenas to advisers owned by insurance companies. The regulator's Enforcement Division is looking at such firms' recall practices within their securities lending programs in an attempt to determine if shareholders are being harmed in pursuit of dividend-related tax benefits. Insurance company-owned fund firms are being targeted because of the way shareholder dollars are invested, but industry experts say all boards overseeing securities lending programs should take this opportunity to ensure they are fully aware of how things work. 

 

Industry observers are waiting to see if the Enforcement Division's fact-finding mission leads to an enforcement action.

 

In addition to the ever-present threat of a regulatory enforcement action, the fund industry faces numerous litigation threats. In its latest claims report, ICI Mutual has provided an overview of the enforcement and litigation landscape. ICI Mutual President Daniel Steiner says the report—which covers the 15-month period of Jan. 1, 2015, through March 31, 2016—is helpful for advisers and boards in anticipating, managing and reducing these types of risks.  

 

SEC Chairman Mary Jo White has her own advice for the fund industry: Implement and enforce comprehensive compliance policies, procedures and systems. She told attendees of the SEC's Compliance Outreach Program that the Office of Compliance Inspections and Examinations would expand its coverage of investment advisers to keep pace with the growth of the industry.

 

In other news, American Century Investment's Mountain View funds board has filled the seat vacated by Nobel winner Myron Scholes nearly two years ago and expanded its board by one seat, and Interactive Data has released survey data showing what the industry expects from the SEC's final liquidity risk management rule—and it's not perfectly aligned with what they might want. 

 

As always, we look forward to your feedback (both positive and critical) on how we're covering the fund governance space. Please email or call with any comments, questions, and suggestions.

 

For now,

 

Hillary Jackson, founding editor, Fund Board Views