Practice

A.G. Edwards indicated in an SEC filing that it expects its revenue to decline as a result of the ban on directed brokerage by mutual fund companies. The firm did not disclose, however, how much of a decline it expects, although it did say that in combination with other regulations, the changes could have "significant and adverse" effects.

The Securities and Exchange Commission has subpoenaed Gabelli Asset Management for possible improper trading, the company indicated in an SEC filing. Last October, New York Attorney General Eliot Spitzer filed a subpoena against Gabelli, which admitted that one client had market-timing arrangements.

A federal appeals court has denied a request by the U.S. Chamber of Commerce to delay new rules requiring mutual funds to have independent chairmen. The world's largest business group had launched a campaign to postpone more stringent governance measures adopted by the Securities and Exchange Commission this past summer pending the outcome of its lawsuit challenging the move.

The National Association of Securities Dealers has fined Sentinel Financial Services Co. $700,000 and censured it for not doing enough to stop market timing in its funds. The market timing, which took place in three Sentinel Group funds, was partly a result of a shoddy supervisory system, the NASD said.

Three mutual funds have reportedly drawn the Securities and Exchange Commission's ire for alleged violations resembling the accounting sins committed by Bridgeway Capital Management. The SEC is now targeting the Putnam Research, Gartmore U.S. Growth Leaders and the WWW Internet funds for potentially erring in performance-based fee calculations. The fees in question rise and fall in proportion to a fund's ability to beat its benchmark, such as the Standard & Poor's 500 Index.

The Securities and Exchange Commission is reportedly reconsidering its proposal to require funds to impose a 2% redemption fee on shares sold within five days of purchase. Of the 280 comment letters the SEC has received on this proposal, 250 are against it, citing increased costs for investors, the difficulty of implementing since many funds are held through retirement or omnibus accounts and the inappropriateness of a government body setting fees. In fact, some at the SEC reportedly believe that requiring funds to disclose their policies to detect and prevent timing is adequate, and they are pushing to make a redemption fee optional.

It's official.

Bear Stearns is reportedly investigating whether top executives in its private-client brokerage unit approved improper mutual fund trades. According to internal documents, Bear Stearns is examining e-mails from 109 of its employees, including several firm executives. Included in that group are the heads of the private client group, Steve Dantus and Vincent Dicks. In addition, the New York Stock Exchange has asked the duo for statements.

With so many surveys reiterating Americans' lack of preparedness for retirement, it's certainly good news that assets in 401(k) plans are finally growing again. However, that's primarily because the stock market performed so well in 2003, not because employers or investors are committing more money.

In its initial probe of four top Canadian mutual fund firms, the Ontario Securities Commission announced that market timing did not take place. The OSC also investigated CI Mutual Funds, AIC Ltd., AGF Fund Management and Investors Group for late trading and found no instance of that, either.