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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
60th Anniversary of the Investment Company Act and the Investment Company Institute

by  Chairman Arthur Levitt

U.S. Securities & Exchange Commission

October 5, 2000

Thank you. Tonightís 60-year celebration of the Investment Company Act and the Investment Company Institute is much more than an anniversary -- it is a celebration of a time-honored commitment to serving and protecting Americaís investors. When President Roosevelt signed the Investment Company Act, he announced to the world his hope that such legislation would enable the industry "to fulfill its basic purpose as a vehicle to diversify the small investorsí risk." Six decades later, I think we can all agree that the Act has fulfilled President Rooseveltís vision. Today, nearly 90 million shareholders from approximately half of the nationís households have investments in mutual funds.

Tonight is also a celebration of cooperation -- of a truly remarkable and longstanding partnership between the SEC and the ICI. Over the years, investors have reaped the benefits of this special alliance as it has worked to promote the investor interest and preserve the public trust. And today, public trust in the fund industry is strong indeed. But as we honor this anniversary tonight, it serves us well to remember that public confidence has not always been something that, these days, might too easily be taken for granted.

By the mid-1930ís, fundamental abuses had become a problem in the investment company industry. The close relationships between investment companies and their sponsors proved ruinous as some unscrupulous sponsors managed fund assets as if they were their own, ignoring their fundamental duty to the investing public. Many funds failed, and even more shareholders lost their investments.

As such, Congress asked the Commission to conduct a comprehensive study of the investment company industry. The resulting report, the Investment Trust Study, laid the foundation for what became the Investment Company Act. Rather than oppose any efforts to enact legislation, however, the industry worked in tandem with the Commission to refine and fine-tune a better piece of legislation. Ultimately, these discussions crafted a final product that was endorsed by both the Commission and ICI, and soon passed with unanimous support.

Roosevelt commended the integrity of the industry and its proactive stance on behalf of investors, "It is a source of satisfaction," he stated, "that business men have at last come to recognize that it is this Administrationís purpose to aid the honest business man and to assist him in bringing higher standards to his particular corner of the business community. In the case of this legislation it deserves notice that the investment trust industry insisted that the Congress grant to the Securities and Exchange Commission broader discretionary powers than those contemplated in the original regulatory proposals."

The partnership forged 60 years ago is alive and well today. The ICI and the Commission continue to work together towards making the mutual fund industry the most trusted, transparent, and respected in the world. Time and again, the ICI has supported laws and regulations designed to protect fund investors. It has established tough voluntary standards that go well beyond requirements of the law, creating best practices for personal investing and providing additional guidance for mutual fund directors.

I want to make special mention, however, of the ICIís ongoing investor education initiatives. More recently, I want to commend your coalition with the National Urban League to promote the "Investing for Success" campaign. Todayís investors are more economically and ethnically diverse than ever before, and we must all do our part to ensure that this trend continues. A thriving marketplace is not an end in itself. It is a means to an end. It is the way to create a society of greater opportunity for all investors, for all Americans. And there is no better way to bring opportunity to more people than to educate them on the fundamentals of sound investing. By providing the guidance and the resources for these programs, the ICI moves more Americans closer to realizing their long-term financial goals.

I am confident that the next 60 years of progress in the financial services industry will present countless challenges to the ICI, its members, and the Commission. And Iím sure that we wonít always agree on how best to meet those challenges. But if we approach these obstacles and opportunities with the same spirit of mutual respect and partnership that has been the hallmark of our relationship since the beginning, I firmly believe that our markets, and this industry, will continue to enjoy a preeminence that is the envy the world over.

Thank you.