Ask people what they think about Paul F. Roye, and they say he's "a nice guy."
But Mr. Roye, who heads the investment management division at the Securities and Exchange Commission, politely scoffs at that description.
"There's 'nice' and then there's 'nice, but.' I put myself in the 'nice, but' category," he said during a recent interview in his office. "I don't have a problem saying 'no' when 'no' is the right answer."
And Mr. Roye, 45, is going to need that toughness.
With more people than ever investing in mutual funds, there is a huge onus on the SEC to protect their rights.
According to the Investment Company Institute, the Washington-based fund industry trade group, 73 million investors owned about $5.6 trillion of mutual funds assets on March 31.
As director of the SEC's investment management unit-which accounts for roughly 5% of the SEC's annual budget and has about 150 employees - Mr. Roye is responsible for crafting the rules that the mutual fund industry lives by. Projects on his plate include shaping the role of outside fund directors and making shareholder reports more user-friendly.
Mr. Roye, who has held the post since November, has spent the past seven months trying to reacclimate himself to life at the SEC, where he started his career 20 years ago. He left the SEC in 1982 to take a post at the Washington office of Dechert Price & Rhoads, where he was most recently a partner.
Now his days consist of congressional and SEC briefings and wading though stacks of papers, which he describes as "10 copies of the same thing reworked."
He spends most of his time in Washington, though he travels around the country to speak at various conferences. That leaves weekends to read up on job-related issues and spend time with his four sons, who range in age from 7 to 16.
It's a stressful job, and it doesn't stop when he leaves the office. But Mr. Roye seems to be taking it in stride.
"Don't make me think about it too long. I might jump out that window," he said, laughing.
His philosophy, he said, is to turn to others for advice.
"I know I'm not smart enough to have all the answers," he said. "I want to be surrounded by people with different perspectives."
Observers-who include former co-workers, adversaries, and even a former client-describe Mr. Roye as a quiet man who is intelligent, practical, and open-minded, with a firm grasp of the rules he's been hired to craft and defend.
"Oftentimes people mistake quietness for lack of toughness," said Barry Barbash, who held the post before Mr. Roye. "That would be a terrible mistake for people to make with Paul."
Mr. Barbash, now a partner in the Washington office of the New York law firm Shearman & Sterling, has known Mr. Roye for 20 years.
Jay G. Baris, a partner at Kramer Levin Naftalis & Frankel in New York, described Mr. Roye as having a leadership quality that lets him keep a cool head.
"My experience is that the pressure will not faze him," said Mr. Baris, who has worked as co-counsel with Mr. Roye.
Mr. Roye had a packed agenda from the moment he returned to the SEC. His current priority is the soon-to-be-announced proposal on strengthening the role of outside mutual fund directors.
Like corporations, mutual funds have boards of directors whose responsibilities include determining fees and expenses. The role of outside directors, who act as watchdogs for the public, has come under increased scrutiny in recent years, and SEC Chairman Arthur Levitt Jr. has made it abundantly clear that he wants to revamp the system through rulemaking rather than legislation.
By the summer, Mr. Roye said, he will recommend ways to ensure that most board members are outside directors, that these directors be self- nominating, and that they have greater access to independent counsel.
In addition, he said, the division is looking at ways to encourage outside directors to "align their interests with shareholders," such as by owning shares in the funds. The SEC is also trying to develop a system to identify outside directors who should really be classified as interested directors. (The Investment Company Institute released recommendations Thursday on strengthening the role of outside directors. See story on page 11.)
Some observers said Mr. Roye's experience as counsel for outside directors while at Dechert Price & Rhoads will help him craft practical, user-friendly rules.
He has "a much clearer picture than others might as to how board meetings really truly function," said Kathleen A. Dennis, the senior managing director of KeyCorp of Cleveland's asset management arm.
Mr. Roye represented the outside directors for KeyCorp's mutual funds when he worked at Dechert Price.
His experience will bode well for bank-run mutual funds in general, said Robert M. Kurucza, general counsel for the Bank Securities Association, a trade group for bank brokerages and mutual funds.
"There's a sensitivity to those issues and quite importantly a willingness to listen and engage the issues," said Mr. Kurucza, a partner with Morrison & Foerster in Washington.
Though strengthening the role of outside directors is at the top of Mr. Roye's agenda, another major initiative is a bid to rework shareholder reports to eliminate extraneous information that could confuse investors. This initiative follows the SEC's adoption of "plain English" prospectuses last year.
There is also the thorny issue of personal trading by fund managers.
In recent years, personal trading by fund managers has been called into question at least two fund companies.
In 1994 the Investment Company Institute made recommendations to strengthen the rules concerning personal trading, but the SEC has not acted on those yet. Mr. Roye said the commission plans to strengthen fund director oversight.
In addition, investment advisers can expect a rule that curbs the use of political campaign contributions to secure pension fund management business "relatively soon," Mr. Roye said.
To be sure, the SEC's role as industry watchdog is likely to be affected by HR 10, the financial services reform bill, particularly when it comes to banks.
For example, the SEC, which favors functional regulation, is particularly concerned that it have the same access to bank trust accounts as it does to bank-run mutual funds.
"We're just looking for fundamental fairness with how funds are treated and if we don't have complete access to books and records, we can't make those kinds of assessments," Mr. Roye said.
Mr. Roye declined to say whether the SEC has trouble accessing records at banks, saying only that it is an area where the agency has "some concerns."
Mr. Roye predicted that asset management will become an even greater part of banks' operations in the future. Though some banks have criticized the SEC for stepping on their toes, Mr. Roye said the agency does not want to impede their growth.
But "if they are fully engaged in securities activities, we ought to be able to regulate them," he said.
Though the future of financial reform is uncertain, Mr. Roye is clear about his role in guiding the SEC's investment management division.
"Hopefully we make the right decisions," he said, referring to the SEC and investors as his clients.
