SEC Chairman Joins Support of Mutual Fund Duplication Bill

A bill to reduce overlapping state and federal regulation of mutual funds on Wednesday won broad support from industry and regulators, including Securities and Exchange Commission Chairman Arthur Levitt.

Senate Banking Chairman Alfonse M. D’Amato vowed to bring it to a committee vote within a month.

The Securities Investment Promotion Act of 1996, sponsored by the New York Republican and other committee Republicans and Democrats, would strengthen supervision of investment advisors and eliminate state review of mutual fund documents.

The Senate bill is the rough companion to a House measure, sponsored by Rep. Jack Fields (R-Texas) that makes more far-reaching changes in the relationship between state and federal securities regulators. The Fields bill passed the House Commerce Committee last month by a unanimous margin and is awaiting a House floor vote.

A key difference between the two is the Senate bill would regulate investment advisors, who help consumers devise retirement savings plans or manage their money through various market strategies. There are 22,500 investment advisors currently, an increase of 500% since 1980. But the SEC lacks sufficient staff to inspect them.

The bill would improve supervision by directing states to regulate smaller investment advisors, or those with $25 million or less in assets under management and who don’t advise any mutual funds. The SEC would regulate advisors above the $25-million threshold. The Fields bill lacks any language on investment advisor regulation.

Levitt, who has been pushing for a broad easing of securities regulations, said the Senate bill would help eliminate duplication.

It “would more clearly define the partnership of shared responsibilities between federal and state securities regulators,” Levitt said.