Compliance October 26, 2007

ICI Pleads for Repeal of MI Legislation Taxing Investment Advice Services

The Investment Company Institute (ICI) has issued a statement strongly urging the state of Michigan to repeal a portion of recently enacted legislation that imposes a sales tax on investment advice services.
Reported by

Michigan House Bill No. 5198 provides for the assessment of taxes “on the storage, use, or consumption in this state of tangible personal property and certain services.’ Among the personal services listed is “investment advice services, as described in the NAICS (North American Industry Classification System) industry code 52393.”

The taxation of advice services would be effective as of December 1, 2007.

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The ICI statement said that, in a letter to two Michigan officials, ICI stated the imposition of this service tax would harm Michigan residents by discouraging them “from seeking financial advice to ensure their retirement security.” The Institute also strongly urged that the sales tax not be extended to tax any services offered by the investment company industry.

The ICI stated the localized service taxes on investment company services would mean:

  • additional costs to Michigan investors seeking to save for their retirement and other long-term needs through mutual funds;
  • placing Michigan-based mutual fund firms at a competitive disadvantage with fund firms outside the state; and
  • logistical obstacles to administering the tax efficiently and fairly.

The ICI statement, with a link to their letter, is here.

The Markets October 26, 2007

September Mutual Fund Flows Increase Sharply Over August

Stock and bond funds posted net inflows of $37.9 billion in September 2007- a sharp increase from the $1.76 billion inflow posted in August, according to data from the Financial Research Corporation (FRC).
Reported by

By Morningstar category, Large Blend funds topped the list, posting net inflows of $6.5 billion for the month, followed by Intermediate-Term Bond funds with a $5.5 billion net inflow and Large Growth funds with a $5 billion net inflow.

International/Global funds led the way with net inflows of $20.5 billion, while Domestic Equity funds posted a $11.2 billion net intake, FRC data showed. Corporate funds placed a distant third with a net inflow of $4.7 billion.

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Barclays Global Investors was the best selling fund group in September, winning a net $9.5 billion in new assets. State Street Global Advisors (SSgA) followed with a net inflow of $6.8 billion. American Funds ($5.1 billion), Vanguard Group ($4.2 billion), and Fidelity Distributors ($2.3 billion) rounded out the top five.

SSgA’s SPDR Trust fund topped the list of best selling funds taking in a net $5.4 billion, while the Dodge & Cox International Stock fund took in $2.6 billion in net inflows and Barclays iShares Russell 2000 Index fund post net inflows of $2.4 billion.

The FRC data can be found at www.frcnet.com.

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