SEC Taxes Mutual Funds?
By Arnold Kling
The latest SEC regulation of mutual funds draws fire from Stephen Bainbridge. He quote Cindy Glassman, an SEC Commissioner who dissented, as pointing out that no cost-benefit analysis was done of the proposal to require mutual funds to have an outside board chairperson. Bainbridge continues,
But it becomes even more outrageous when one considers Glassman’s further complaints:
It is a fact that many of the top-rated funds today based on high performance and low fees have inside chairs. Why should we tell shareholders they can no longer have the form of governance that produced this high level of performance? And further, why should we require them to pay for it? There can be no doubt that this requirement will add to fund expenses. An independent chair cannot be expected to have — and in most cases, will not have — hands-on knowledge about fund operations. Therefore, to be effective, the chair would have to hire a staff. Shareholders will bear that expense as well as the likely additional cost of the independent chairman. In sum, the benefits are illusory, but the costs are real.
In effect, the SEC just imposed a new tax on all mutual fund investors and for no good reason. And people wonder why I complain about over-regulation.
For Discussion. What was broken that the new SEC regulation is supposed to fix?