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Regulators' Odd Focus on Funds Could End Badly for Investors

Slapping the 'systemically important financial institution' designation on asset managers could cost investors and the broader economy.

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Will an alphabet soup of U.S. and global regulators change how the investment management business works? That answer increasingly appears to be yes--and investors and investment firms should be very worried.

Right now, U.S. and global regulators are conducting parallel inquiries to determine whether asset-management firms should be deemed "systemically important financial institutions," or SIFIs. Globally, a Basel-based group called the Financial Stability Board, or FSB, has led the investigation. In the U.S., using authority granted by the Dodd-Frank Act, a group of regulators called the Financial Stability Oversight Council, or FSOC, has managed its own inquiry.

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Scott Cooley does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.