All financial regulation affects your financial interests, at least indirectly.
So you’re going to wind up paying for FSOC.
What’s different about FSOC is that it is likely to have a direct effect on your financial interests.
Please Keep Me Informed
MSGP advocates for common-sense financial regulation reforms. We’re on the side of Main Street businesses, workers, savers and investors.
There are many ways that FSOC’s efforts to promote financial stability could interfere with your investment decisions – and the ability of your mutual fund manager to do what is in your financial best interest.
That’s right! You get socked by FSOC!!
Here’s an example. Most of us save for the big expenses in our lives – retirement, a child’s college tuition, a home down payment – by investing in mutual funds. You may use a mutual fund as a way to invest in stocks or bonds. You might do this directly or indirectly through your retirement fund or 401(k) plan.
In short, you would pay for the cost of FSOC regulation..
The Dodd-Frank Act gives FSOC the authority to subject mutual funds to bank-style regulation by the Federal Reserve. Bank-style regulation of your investment in stock or bond markets would impose costs on your fund – and your fund manager would have no choice but to pass those new costs right through to you.
So what happens if the FSOC says your mutual fund is a SIFI – a Systemically Important Financial Institution? It is likely that about 10% of the money you invest would not be invested. Rather, that 10% of your investment would go into a fund to bail out other entities the FSOC or the Federal Reserve decides are “too big to fail.”
That’s 10% of your money sitting around and … doing nothing – at least not for you.
Your fund manager is required by law to act in your best interest when deciding how to invest according to your investment instructions.
So let’s say there’s a stock in your portfolio and the Fed gets worried that bad news about the company could lead to a mass sell-off and rock the market. FSOC could instruct your SIFI-designated fund or its manager not to sell that stock – even though your fund manager believes it is very much in your best financial interest to sell it.
You’re stuck. You can’t sell. You can lose money.
You are handcuffed by government. That’s not the way the American system should work.
FSOC and its notions of financial stability trample on your financial freedom.
The Fed could permit your fund manager to sell your holdings in the fund, or a particular stock from among your fund investments, but only if you pay a fee to do so. That would be like the Fed demanding ransom from you in order to get out of your investment position – paying money in order to try to avoid an even larger loss.
You would have to pay – you’d have to buy back your financial freedom. That’s not freedom. That’s regulatory tyranny.
FSOC socks you by costing you opportunity, plain and simple.