With the anniversary of the collapse of Lehman Brothers in the rearview mirror and the economy improving, industry executives and analysts are questioning whether the wealth management industry still needs to undergo substantial regulatory change, and what changes, if any, could be beneficial.

"If you tighten regulations too much, you will clog up the market," said Erik Sirri, the former director of the Security and Exchange Commission's division of market regulation, at the Investment Company Institute's annual tax and accounting conference. "Innovation occurs at the fringes. We should let the fringes be small and innovative, so that if they fail, they will fail small."

In the age of BlackBerrys, Twitter and high-frequency trading, innovations occur so quickly that regulations cannot keep up. The recently beefed-up staff at the SEC has a huge backlog of pending guidance, ranging from target-date funds, money market funds and the adviser custody rule, to updating accounting rules to bring them closer to International Financial Reporting Standards.

"The update on [the standards] is that there really isn't an update," said Richard Sennett, the chief accountant of the SEC's division of investment management. "We have been busy with other initiatives."

The SEC is studying issues on securities valuation, risk management, derivatives and counterparty exposure. The industry could see guidance before the end of the year.

Many industry leaders have touted the resilience of mutual funds throughout the crisis, and argue that despite having lost assets when the stock markets declined, mutual funds did exactly what they were supposed to do and were transparent and well regulated the entire time.

While acknowledging that all of the economic problems have not fixed themselves, industry experts say it would be a mistake for Congress to enact legislation in haste. Even tiny changes to areas like the tax code can have thousands of unintended ripple effects on other areas.

"There is no way to write legislation that will prevent all future crises," said Sean Collins, senior director of industry and financial analysis at the Investment Company Institute. "We have to form legislation that's realistic and helps financial institutions be resilient, and can help institutions take the shocks as they come. If you prevent the formation of capital, you prevent businesses from taking entrepreneurial risks."

The crisis was caused by a failure of leadership among industry and government leaders, and many of those leaders are now claiming credit for the recovery, said Andrew Lowenthal, the president of Porterfield, Lowenthal & Fettig LLC. "For some reason, we all have the notion that the only people who can save us are the very people who drove us to the brink," he said. "The very people who led us to this are all patting themselves on the back now."

The industry should not underestimate the public's continuing hostility toward it, he said.

Shawn Baker, a partner at PricewaterhouseCoopers LLP, said there is a lot of concern among auditors and some clients over regulated investment company modernization and whether the Treasury Department and Internal Revenue Service should repeal the preferential dividend rule for publicly offered funds.

Many international investors are looking to invest in U.S. companies, despite the tax consequences, said Laura Melman, tax director at JPMorgan Funds Management, a unit of JPMorgan Chase & Co.

Dividends are subject to a withholding tax, and dividends paid out to offshore clients are often subject to an additional 30% withholding tax. There are also many exceptions: Some countries have treaties with the U.S. for different tax treatments, Melman said. "As our industry continues to globalize, we need to reassess the holding policies with our shareholders," she said.

The convergence of accounting rules between U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards is happening so quickly on both sides that accountants heads are spinning trying to keep up.

"The financial crisis forced all of us to do more with fewer people," said Gwen Shaneyfelt, a senior vice president of global taxation at Franklin Templeton Investments. "There are a lot of numbers flying around and a lot of opportunities to make errors."

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