September 30, 2010
One of the primary roles of the SEC as I understand it is to protect investors. The assumptions of your proposal is that investors are so incapable of making an investment decision that the SEC must intervene. Making sure that fees and expenses are clearly defined fulfills your role. For a regulatory agency to make decisions/rules about such fees and expenses implies that their judgement is superior to the system of open competition that has made our county great. If such fees and expenses are clearly identified, it is up to the provider of an investment product to make the product worth the expense through performance, risk control, etc. All funds are not equal. Investment professional should have the right to make a continuing compensation for providing continuing service. Capping total funds for this purpose implies that the registered rep has no value after some time period. Since fund trails are often a significant part of some investment professional's compensation the proposals would encourage the recommendation of replacement investment (one that could generate a new commission) for the registered rep to continue to make a living. I realize that the SEC isn't concerned about whether or not an investor makes a profit or whether or not a registered rep makes a living, only that everything is fully disclosed and "fair" by its definition. This is part of a continuing saga of unnecessary government intervention. Regulators are not investment professionals. You have not done the job you are charged with regulating. Yes, it would solve your concerns if all funds were no load and had no expenses and all investment professions worked for free. Continued expansion of over control can destroy an entire industry and perhaps the economy. There are enough rules. Just make sure all fees and expenses are clearly disclosed regardless of whether they are 25bps a year or 25% a year and decide you have filled your role as long as the investor knows. Free enterprise needs disclosure not control. Next you'll decide its your role to define what each investor can invest in. Get real. There are plenty of rules. How about doing something really positive if you want to protect investors like requiring that your agency or broker/dealers do training not just on rules and regs, but on how to actually do the job. To my knowledge no advisor is given this training and there sure aren't any exams or continuing education to test whether or not a registered rep can put together a risk controlled portfolio that is consistent with the client's objectives.. and you worry about whether or not a fund company is charging more that another. As usual, misguided efforts. I can hardly wait until there is a huge class action suit and someone asked someone from a major broker/dealer or maybe the SEC what they have done to fulfill their fudiciary to investors by making sure that financial professionals have any clue as to how to do their job effectively. No one is even given a recommended reading list.
Sorry, I guess that idea is just too simple.
Leave things alone.