Mutual fund directors say that overseeing their
service providers is the toughest job they have under newly introduced
SEC regulations, according to a new survey.
The survey by PricewaterhouseCoopers found that,
after the new regulations were in effect for about a month, fund
directors said the assessing, testing and evaluating of investment
advisors, underwriters, transfer agents and other service providers had
taken most of their attention.
Of those surveyed, 64% said provider oversight is
the most difficult part of the new regulations to monitor. Ranked
second in difficulty was monitoring securities trading and brokerage
practices, by 15%. Overseeing principal underwriter activities was
cited by 9% of respondents as the most difficult job.
The survey's authors noted that portfolio valuation
and fund pricing were not mentioned by any of the 70 fund directors
surveyed.
Fund directors are focusing most often on investment
advisors when it comes to oversight. Of the directors surveyed, 36%
said advisors would be asked to make compliance control presentations
over the next 12 to 18 months.
"Operating in a market that is heavily dependent
upon service providers and that has faced some 1,300 enforcement
actions with $5 billion in fines, penalties and disgorgement in the
past two years, mutual fund directors must ask the right questions,"
says Tony Evangelista, a PricewaterhouseCoopers partner and leader of
the firm's regulatory compliance unit. "The SEC is holding fund
directors ultimately accountable, so they must continuously monitor and
test the controls they put in place."