Reforming the Taxation and Regulation of Mutual Funds: A Comparative Legal And Economic Analysis

101 Pages Posted: 28 Aug 2009 Last revised: 19 Oct 2009

See all articles by John C. Coates, IV

John C. Coates, IV

Harvard Law School; European Corporate Governance Institute (ECGI)

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Abstract

Most Americans invest through mutual funds. An analysis of laws governing mutual funds shows that U.S. mutual funds are taxed less favorably and regulated more extensively than direct investments or other collective investments, including alternatives available only to the wealthy. The structure of U.S. regulation — of 70-year-old proscriptive bright-line rules subject to SEC exemptions — makes success of U.S. mutual funds dependent on the resources, responsiveness, and flexibility of the SEC. The legal framework for mutual funds in the E.U. is generally as or more restrictive and inflexible than U.S. law, but competitive pressures force European supervisors to be more flexible in adopting and implementing regulations, and E.U. regulators have greater resources and are more responsive than the SEC. The paper discusses mutual fund legal reforms, including proposals to eliminate unjustified disparities in the treatment of mutual funds and their substitutes and to improve regulatory flexibility and resources.

Keywords: reform, taxation, regulation, mutual funds, investments, SEC, Coates

Suggested Citation

Coates, John C., Reforming the Taxation and Regulation of Mutual Funds: A Comparative Legal And Economic Analysis. The Journal of Legal Analysis, Vol. 1, No. 2, pp. 591-689, Summer 2009, Harvard Public Law Working Paper No. 09-53, Available at SSRN: https://ssrn.com/abstract=1463418

John C. Coates (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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