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U.S. Securities and Exchange Commission

Speech by SEC Staff:
A Celebration of the 60th Anniversary of the Investment Company Act

Open Remarks by Commissioner Isaac C. Hunt Jr.

U.S. Securities & Exchange Commission

Major Issues Lecture Series
October 4, 2000

The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of Mr. Hunt and do not necessarily reflect the views of the Commission, the Commissioners, or other members of the Commission's staff.

Thank you and good afternoon. It's a pleasure to be here with all of you today as we pause to mark the 60th anniversary of a statute that, in my view is one of the most important regulatory schemes in the federal securities laws. This is because of the tremendous size of the industry that it regulates and the importance of that industry to the financial security of millions of Americans.

Investment companies are one of America's primary savings and investment vehicles. A strong stock market and robust American economy provided a favorable environment for continued investment company growth during 1999, as assets increased by more than $1.3 trillion. As of March 31, 2000, over $7.6 trillion was invested in investment companies. At the end of 1999, a total of 30,455 investment company portfolios were managed or sponsored by 1,080 investment company complexes. The $7.6 trillion in assets managed by investment companies today is more than double the $3 trillion on deposit at commercial banks.

The Investment Company Act, the principal statute that regulates investment companies, is perhaps the most complex of the federal securities laws. The regulation of investment companies is based on the same principles of full and fair disclosure that are the foundation of the federal securities laws.

However, the reach of the '40 Act extends beyond mere disclosure and reporting requirements. The '40 Act is, in effect, a comprehensive corporate statute. It places substantive restrictions on virtually every aspect of the operations of investment companies; their governance and structure, their issuance of debt and other senior securities, their investments, sales and redemptions of their shares, and, perhaps most importantly, their dealings with service providers and other affiliates.

But while the '40 Act is comprehensive, I believe its real strength is how adaptable its timeless principles have proven. I have no doubt that the authors of the original statute never contemplated many of the specific challenges that have confronted the industry and the Commission over the last 60 years, but an answer to those challenges that both served investors' interests and promoted the health of the industry was always found in the statute.

I know that Paul Roye and the Division of Investment Management are currently engaged in several initiatives to keep the regulation of investment companies apace of the rapid changes in the industry. It is perfectly fitting, therefore, that we remind ourselves of the history and principles behind the statute that have very ably guided us to this point. I think Paul has some more to say now on that subject. I would like to especially welcome those of you who have joined us from outside the Commission to mark this exciting anniversary. Paul.