A System of Fiduciary Protections for Mutual Funds

21 Pages Posted: 24 Aug 2020

Date Written: July 23, 2020

Abstract

The regulation of mutual funds in the United States arguably contains the world’s most extensive system of fiduciary protection, buttressed by elaborate liability rules and a host of procedural protections and mandatory disclosure requirements designed to facilitate investor protection and choice. The intensity of this regulatory structure is a subject of perennial debate, as public officials and policy analysts attempt to balance the cost of compliance and oversight against benefits to investors. Over time, government officials have made numerous supervisory accommodations to ameliorate the system’s costs and facilitate industry innovations. But, the burdens of this enhanced system of fiduciary protections for mutual funds remain significant and have encouraged industry participants to evade these legal requirements in a number of ways, such as the creation of alternative vehicles for collective investments (including insurance products and managed accounts of various sorts) and the imbedding of regulated mutual funds into other legal structures that escape the full application of the enhanced systemic of fiduciary protections for mutual funds. Technological innovations, such as robo-advising, are likely to accelerate this trend. In this chapter, I explore this important illustration of regulatory arbitrage and suggest areas where aspects of mutual fund regulation might appropriately be extended to functionally similar investment vehicles.

Keywords: Mutual Funds, Fiduciary Duties, Financial Regulation, Investor Protections, Consumer Finance, Disclosure

JEL Classification: A11, D11, D18, G02, G18, G20, G28, K22, K23

Suggested Citation

Jackson, Howell Edmunds, A System of Fiduciary Protections for Mutual Funds (July 23, 2020). Available at SSRN: https://ssrn.com/abstract=3659500 or http://dx.doi.org/10.2139/ssrn.3659500

Howell Edmunds Jackson (Contact Author)

Harvard Law School ( email )

Griswald 402
1563 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-5466 (Phone)
617-495-5156 (Fax)

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