Key Regulatory Issues for 2006

March 2006

Overview & Issues

SEC Chairman Cox has made disclosure of executive compensation his signature issue to date. The Chairman’s agenda for 2006 – at a comprehensive level – is less clear beyond the issues that he inherited. Those issues of interest to ICMA-RC include the hard 4 p.m. close and redemption fees.

• Hard 4p.m. Close

  The SEC has never issued a final proposal on the hard 4 p.m. close, but has been working with private industry to craft the final rule. We anticipate that the industry/SEC compromise version will be more workable for intermediaries. It will likely maintain the status quo (current law) whereby an intermediary (such as ICMA-RC) could take the trade up to 4 p.m. and get that day’s price. But the intermediary would be required to date and time stamp receipt of the order and there would be audit requirements. We do not yet have a timetable for the final rule.

• Redemption fees

  ICMA-RC supports an industry-wide standard that would eliminate the need to deal with a variety of different approaches from our fund companies. Multiple approaches results in added administrative burdens and associated costs. ICMA-RC hoped that the SEC would next propose an industry-wide standard but instead the SEC proposed new guidance on the redemption fee rule that, if approved, will clarify the definition of intermediary for fund families. According to this recent proposed guidance, there was no consensus among commenters about whether the SEC should develop uniform standards and as a result the SEC does not have plans in the near term to propose such standards.

We are paying close attention to these issues — and any new issues that emerge — and will inform you as developments occur.