Statement of the
Investment Company Institute

On the U.S. Securities and Exchange Commission’s
Appropriations for FY 2006

Submitted to the Subcommittee on
Science, State, Justice and Commerce, and
Related Agencies Committee on Appropriations
U.S. House of Representatives

April 12, 2005

The Investment Company Institute1 appreciates this opportunity to submit testimony to the Subcommittee in support of the Administration’s FY 2006 Appropriations request for the Securities and Exchange Commission (SEC). We commend the Subcommittee for its consistent past efforts to assure adequate resources for the SEC.

Mutual funds are an integral part of the U.S. economy and continue to be one of America’s primary savings and investment vehicles for middle-income Americans. Since 1990, the percentage of U.S. retirement assets held in mutual funds has more than quadrupled. Today, more than 92 million investors in nearly 54 million U.S. households own mutual fund shares; the median household income of fund shareholders is $68,700. These millions of ordinary Americans continue to recognize that mutual funds are the best means of achieving their long-term financial goals. They deserve and benefit from continued vigilant regulatory oversight of mutual funds.

In addition to their role as the investment vehicle of choice for millions of Americans, mutual funds are major investors in securities and participants in the marketplace. As such, they have a strong interest in assuring the SEC’s continued ability to soundly and effectively regulate securities offerings, other market participants, and the markets themselves. For all of these reasons, sufficient funding of the SEC is critically important.

The Administration’s FY 2006 budget proposes SEC funding at a level of $888 million, which is slightly less than the $913 million appropriated in FY 2005. The request for a lower funding level reflects the fact that the SEC’s actual spending in FY 2005 was less than anticipated. The SEC has determined that this level provides it with adequate funding to fulfill its regulatory mandate and continue protecting the nation’s investors.2 Accordingly, the Institute urges Congress to provide appropriations at this funding level.

While providing adequate funding is vitally important, it is equally important that the SEC deploy available resources in ways designed to assure the effectiveness of its regulatory and law enforcement efforts. Chairman Donaldson appropriately, in our view, has identified a continuing need to focus on internal reforms that will improve the performance of the SEC.3 This includes, for example, providing regulatory guidance that better anticipates issues, developing closer integration of the activities of different SEC divisions and branch offices, implementing new inspection strategies, considering new uses of technology that can result in greater operational efficiencies, and conducting empirical research that informs major rulemakings. We support appropriate funding of the SEC to facilitate these and other initiatives to enhance the effectiveness of the SEC.

In conclusion, it is critically important that the Commission have sufficient resources to enable it to be an effective and efficient regulator and fulfill its mission of protecting the nation’s investors, including the more than 92 million Americans who own mutual funds. Accordingly, we support providing the SEC with the level of funding requested by the Administration and supported by Chairman Donaldson.

We appreciate your consideration of our views.


1The Investment Company Institute is the national association of the American investment company industry. Its membership includes 8,534 open-end investment companies (“mutual funds”), 648 closed-end investment companies, 144 exchange-traded funds and 5 sponsors of unit investment trusts. Its mutual fund members manage assets of about $8.037 trillion. These assets account for more than 95 percent of assets of all U.S. mutual funds. Individual owners represented by ICI member firms number 87.7 million as of mid 2004, representing 51.2 million households.

2 See Testimony Concerning Fiscal 2006 Appropriations Request for the U.S. Securities and Exchange Commission by William H. Donaldson, Chairman, U.S. Securities and Exchange Commission (March 11, 2005).

3 Id. See also Remarks from the Conference Board’s 2004 Annual Dinner by William H. Donaldson, Chairman, U.S. Securities and Exchange Commission (October 14, 2004); and Remarks at the Exchequer Club of Washington D.C. by Paul Schott Stevens, President, Investment Company Institute (December 15, 2004).