In Focus

CII Collaborates to Ask SEC for Improved Disclosure of Research Costs

In a June 26 joint letter, CII, Healthy Markets and CFA Institute asked the SEC for better disclosure of research costs to asset owners. The letter was in response to MiFID II, year-old European rules that prohibit fund managers from paying for stock research with trading commissions. Since MiFID II went into effect, European fund managers have mostly absorbed the cost of research but U.S. managers continue to use bundled commissions. Many institutional investors are concerned that they are unknowingly subsidizing research in Europe. In the letter, CII, Healthy Markets and CFA Institute urged the SEC to protect asset owners by revising its guidance Section 28E of the Securities Exchange Act of 1934 to require fund managers to disclose amounts paid for research from client accounts. CII has long supported transparency of research costs and will continue to encourage the SEC to work toward full unbundling of pricing of U.S. brokerage and research services.

CII Backs Bill to Make PCAOB Disciplinary Hearings Transparent

In a June 27 letter, CII expressed support for a bill that would make Public Company Accounting Oversight Board (PCAOB) enforcement hearings and related notices, orders, motions and sanctions open and available to the public unless otherwise ordered by the PCAOB. CII endorsed S.1256, the PCAOB Transparency Act, in letters to Senate co-sponsors Charles Grassley (R-Iowa) and Jack Reed (D-R.I.). CII sent a similar letter to a House Financial Services subcommittee that held a hearing at which the bill was discussed. CII believes the current lack of transparency surrounding PCAOB disciplinary proceedings could provide accounting firms with an incentive to litigate cases in order to continue to shield conduct from the public. The legislation would also give boards and shareholders access to valuable information, such as fines levied against an auditor, that could help inform votes for directors who chair or serve on the audit committee and for ratification of external auditors.