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News Flash - Roye Urges Fund Industry To Rigorously Self-Police

WASHINGTON - Paul Roye, the Securities and Exchange Commission's director of the division of investment management, issued a wakeup call for the mutual fund industry, telling attendees that the industry's place in the market is not assured, during remarks at the Investment Company Institute's annual convention here.

Roye told the history of the demise of the once-dominant railroad industry in the U.S., drawing obvious parallels to the fund industry's problems and those that led to the downfall of the rail industry. He said over-regulation, the railroad's slow moving political nature and the fact that it didn't care about its customers were all contributing factors. "The mutual fund industry must be mindful that its place in the economy is not guaranteed," Roye said.

Suggesting the mutual fund industry redouble its efforts to be proactive, Roye acknowledged that the fund industry does have a history of being proactive. He also said it is up to the industry to self-police and not "stick its head in the sand. Just because an activity may be legal doesn't mean its appropriate." He said that the commission is skeptical about implementing a self-regulatory agency and urged the industry to keep in mind that what's best for the investor is best for the industry. He suggested that regulators and fund companies alike should do their best to make sure investors get a fair deal.

Roye also urged industry input about whether or not hedge-like strategies should be opened to retail investors.

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