PALM DESERT, Calif. -- Eileen Rominger, in her first appearance before a gathering of members of the mutual fund industry’s largest trade group, said that compliance with existing and forthcoming rules as well as robust regulation of these is essential to achieving and maintaining the trust and confidence of investors.
Appearing by video link from Washington, D.C., the director of the division of investment management at the Securities and Exchange Commission, said derivative securities can be used effectively for either hedging risks or accentuating them and that other relatively new products such as exchange-traded funds bring new complexities to investment markets that need to be monitored closely to protect investors.
Her comments were made to attendees of the 2011 Investment Company Institute Mutual Funds and Investment Management Conference. This was her first presentation to the group.
Rominger assumed her post in January, after 18 years at Oppenheimer Capital and 11 at Goldman Sachs Asset Management. Her last post there was as its global chief investment officer.
She said the SEC supports the creation of the Financial Stability Oversight Council, which will identify and track significant risks to the nation’s financial system. Reforms that are being worked out are in their second phase of development, she said, and should lead to greater stability and liquidity for key types of financial products, such as money market funds.
The SEC also will be looking at how to maintain or increase investor confidence in exchange-traded funds, which now capture about $1 trillion in investor assets, and target-date investment funds, which may need to supply additional information to investors to reduce confusion, she said. Also meriting attention she said are the annual marketing and distribution expenses of mutual funds, aka 12b-1 fees.
This may take time, she said. Nothing is more valuable than understanding how the development and marketing of products actually work and “getting the right answer’’ that does improve practices.
“This is not easy,’’ she said.