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The Rise of Mutual FundsAn Insider’s View$
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Matthew P. Fink

Print publication date: 2011

Print ISBN-13: 9780199753505

Published to Oxford Scholarship Online: January 2012

DOI: 10.1093/acprof:oso/9780199753505.001.0001

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Reentry of Securities Firms and Banks

Reentry of Securities Firms and Banks

(p.133) 7 Reentry of Securities Firms and Banks
The Rise of Mutual Funds

Matthew P. Fink

Oxford University Press

This chapter focuses on the participation of securities firms and banks in the mutual fund industry. Securities firms and banks have had an on-again, off-again relationship with the investment company business. First, in the 1920s, they were major sponsors of closed-end funds. In 1928 one observer wrote, “About sixty per cent of the investment trusts are under the control of investment banking houses, and another ten percent are affiliated with banks and trust companies.” Second, following the 1929 crash, securities firms and banks exited the investment company business. Banking's exit was ratified in 1933 by the Glass–Steagall Act, which generally prohibited a firm from engaging in both banking and securities activities. Third, in the late 1970s, securities firms began sponsoring and underwriting mutual funds. Banks sought legislation that would permit them to engage in mutual fund and other securities activities but were blocked by the securities and mutual fund industries. Eventually, banks gained entry through a series of judicial decisions. Most recently, a number of securities firms have exited the fund business, whereas banks continue to manage a substantial portion of fund assets.

Keywords:   mutual fund industry, securities firms, banks, investment companies, mutual funds

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