SEC Fee 'Just Another Tax'
In an effort to pump more money into the Securities and Exchange Commission (SEC), fund managers are demanding that the so-called "SEC fee" go entirely to the industry watchdog agency and not at all to the U.S. Treasury.
The International Counsel Association of America is angry that a large part of the SEC fee has been appropriated in the past by the U.S. Treasury to be used for things other than the funding of the SEC, which has been under fire recently by some who claim lax supervision led to the mutual fund crisis.
The SEC fee is called "just another tax" by some who want to see reforms in how the fee is disbursed. The ICAA represents many of the U.S. fund management profession’s most illustrious names, many of whom believe that the SEC needs more money to properly oversee the industry. The SEC expects to raise about $1.6 billion in fees next year with just $842 million going to fund SEC activities. It’s the $705 billion left over that goes to non-SEC functions that has the ICAA up in arms.
Fueling the controversy over the fee are signs that the agency is cutting back on routine checks of investment companies so it can focus on the huge investigation into the market timing scandal that has tainted the mutual fund industry. Industry insiders believe fewer inspections will add to the perception that corruption is going unchecked.
"If this wasn't the federal government but a private organisation which said 'I'm taking your money to do this with it' and they didn't do that with it, you'd sue them for civil fraud,” said Gordon Marchand, ICAA president, in an interview with Financial Times. "Only a fraction of the fee ends up back with the SEC, so really what it is is a tax: it's subsidising other government activities."
The SEC has seen an increase in funding as it stepped up its oversight activities after scandals within Enron and Wall Street banks were uncovered, but in 2002, the agency saw just $487 million of the more than $1 billion collected in fees, Financial Times reported.