Recordkeeping Reform Rule 12b-1 has been a central focus of many fund-related public policy discussions in recent months. My guess is that fund books and records requirements have not. Books and records, by their very nature, are behind the scenes. Many are locked up in a warehouse or a decrepit file cabinet in the office file room. It is human nature to say "out of sight, out of mind" and focus on more exciting business or public policy goals. However, the investment adviser and investment company books and records regimes have been out of date for years, if not decades. There is a tremendous need to modernize fund and adviser recordkeeping requirements, many of which originated in the 1960s.
I have lived with the fund and adviser books and records requirements, on both the side of the regulator and the regulated. I therefore am acutely aware of the need to bring the books and records requirements into the 21st century. The paper and trade-blotter based books and records requirements of today are antiquated in a world that is accustomed to instant messaging, video conferencing and downloadable data. In my view, any reform of books and records requirements will need to harness the power of available technology and allow for developing technologies, all while not locking firms into a one-size-fits-all approach.
During 2007, my staff visited advisory firms, both large and small, to obtain a better sense of how they maintain their records and make use of the technologies available to them. During 2008, the staff will be putting what was learned to use as they develop a recommendation for books and records reform.
Our expectation is to focus first on reform of the adviser books and records requirements and then translate those reforms to funds' books and records. Of course, input from the fund industry will be essential once a proposal is put forward. I look forward to significant action on books and records reform in 2008.
