SEC's White Warns Directors to Be Vigilant for Credit-Market Turmoil
March 29 2016 - 10:30AM
Dow Jones News
WASHINGTON—Directors of mutual funds should look to the failure
of a distressed-debt fund last year and probe how prepared their
portfolio managers are for the kind of turmoil that doomed the
Third Avenue Focused Credit Fund, SEC Chairman Mary Jo White said
Tuesday.
"Directors of funds should also be thinking about and asking
fund managers whether these events could happen at your fund, how
to prevent them from happening, and how to respond promptly and
effectively if they do occur," Ms. White told a conference of
independent directors of mutual funds in Washington.
Third Avenue suspended clients from pulling their money from the
$788 million fund in December after saying it would have to sell
assets at fire-sale prices to meet redemptions. The move rattled
credit markets and sparked widespread concern about other mutual
funds that invest in high-yield bonds.
Third Avenue Management LLC Chief Executive Officer David Barse
left the firm just days after the firm blocked investors from
withdrawing their funds.
Ms. White also said that technology glitches that bedeviled Bank
of New York Mellon Corp. last year should serve as a warning to
fund directors.
BNY Mellon was unable to provide prices for more than 40 mutual
funds and exchange-traded funds last August after its technology
broke down on August 24, a day when broad market turmoil caused
hundreds of ETFs to halt trading. Fund companies affected included
Goldman Sachs Group Inc., Guggenheim Investments, Prudential
Investments, Federated Investors and Invesco PowerShares.
"As a director, it is incumbent upon you to consider what these
and other risk areas could mean for your fund in the future," Ms.
White said.
Write to Dave Michaels at dave.michaels@wsj.com
(END) Dow Jones Newswires
March 29, 2016 10:15 ET (14:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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