The economic climate of the past few years has spurred a flurry of legislation, regulation, and rules aimed at the financial industry. The first wave of regulation was directed at the securities industry, specifically public companies. However, now Congress and the regulators are addressing the next layer of the market, the mutual fund industry. The current regulatory issues can be classified as related either to enforcement or disclosure. As will be discussed later, mutual funds are the most heavily regulated segment of the securities industry. However often times problems develop not due to lack of, or loopholes in the regulation, but in the enforcement of existing rules and regulation. The second classification of issues all relate to an increase in the specificity, content or accuracy of mutual fund disclosures.

This paper will first provide a brief history of significant events and legislation that have shaped the mutual fund industry, making it the most heavily regulated segment of the securities industry. To close out the history lesson, the paper will provide a closer look at recent economic events, and our society’s initial response

Another industry argument is that the SEC is holding mutual funds to a higher standard than other institutional investors are held. Pension Funds in particular are not under the SEC jurisdiction, and are not required to disclose proxy voting. However, this argument does not have much merit, as it is quite possible that these requirements will follow, and the lack of a requirement on pension funds does not ease the risks associated with respect to mutual funds. Additionally, the Labor Department has been investigating the situation, and found that many pension-fund investment managers don't know who, if anybody, is voting proxies on shares of stock the funds hold. Often, the shares may not be voted at all. The Department made clear at that time that these managers have legal responsibilities to vote shareholder proxies.

The current regulatory issues can be classified as related either to enforcement or disclosure. As discussed earlier, mutual funds are the most heavily regulated segment of the securities industry. However often times problems develop not due to loopholes in the regulation, but in the enforcement of existing rules and regulation. The second classification of issues all relate to an increase in the specificity, content or accuracy of mutual fund disclosures.

Some topics in this essay:
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