The chapter explores the rise and fall of the mutual fund brand, beginning with the observation that growth in the mutual fund industry has stagnated relative to the industry’s dramatic rise in the preceding two decades. It suggests that both that stagnation and the previous growth may be attributable to government policies. Specifically, the chapter identifies a suspension of the SEC’s program of aggressive regulatory innovation and the agency’s inaction in the face of threats to the mutual fund brand. The author calls for the Commission to reclaim its role as a regulatory entrepreneur by using its broad exemptive authority to stave off the prospect of the mutual fund brand stagnating and withering in the vacuum of SEC paralysis.
Conduct standards for investment advisers in the US reflect the balkanised structure of US regulation of financial services, a highly politicized regulatory environment, mutually reinforcing private and public enforcement mechanisms, the type of account and asset at issue, and the nature of the division of power between federal and state actors. Such a melting pot defies generalization, but certain themes persist over time. The US system has a public and private culture of strong enforcement of antifraud proscriptions in which diverse regulators and private rights of action afford meaningful, albeit hard to measure protection for retail investors. But it also reflects a culture of caveat emptor in the absence of outright fraud. Although the recent trend toward strengthening existing fiduciary obligations has followed a bumpy path, over time there has been a long-term reversion to a mean of steady progress toward a universal fiduciary standard for retail investment advice.