Competition and Investment Management

Abstract

THE U. S. Comptroller of the Currency was responsible in 1963 for a new Regulation 9 entitled Fiduciary Powers of National Banks and Collective Investment which among other changes in the former Federal Reserve Regulation F, permitted investments in a Common Trust Fund of managing agency accounts, required more public disclosure of financial reports of all collective investments funds, relaxed some restrictions on advertising and also permitted public disclosure of past performance records in the financial reports of such Funds. The Securities and Exchange Commission, however, is insisting on more complete and adequate public disclosure for the protection of the investor in such Funds, comparable to the full public disclosure requirements of the Investment Company Act of 1940; and Congressional hearings on this subject are expected this year. Without taking sides on the merits of this controversy, reflecting the differences in thinking on the one side of the S.E.C., on the other side of banking and trust institutions, and perhaps somewhere in between of the Comptroller of the Currency, what follows is an attempt to show that the American business tradition of active and open competition, fostered in the investment management field by the Investment Company Act of 1940, has provided certain advantages and benefits to the public. This competition has required investment companies to be increasingly concerned with (1) comparisons of performance records, (2) lower costs, and (3) broader services.