Practice

Calpers, the nation's largest pension fund with $167 billion in assets, last week adopted a code of ethics for its outside money managers and consultants.

If advisers needed a go-go growth fund in the late 1990s, they probably turned to Janus Capital Group. Yet the aggressive strategy that Janus used to manage most of its funds ultimately backfired. After the tech bubble burst, the Janus name became a synonym for corporate management turmoil, manager exodus and vast fund outflows.

Will the growing number of settlements between disgraced fund companies and regulators put pressure on other fund advisors to slash fees, too? MFS, Putnam Investments, BoA and Alliance, the latter with a staggering 20% reduction over five years valued at a quarter of a billion dollars, have paved the way to what has become the industry's $64,000 question.

In his seminal book "The Right Stuff," Tom Wolfe wrote of those engineers and test pilots who believed in the 1940s that the sound barrier was a "brick wall" that would cause anyone who attempted to break it to "augur in" and "buy the farm." Chuck Yeager, of course, proved them to be wrong.

In rapid succession, several market-timing mutual fund cases have come and gone since Gary Pilgrim and Harold Baxter and the Wayne Pa.-based firm that bears their name, Pilgrim Baxter & Associates, were charged with fraud and skirting fiduciary responsibilities by regulators in mid-November, yet the case is still unresolved.

The National Association of Securities Dealers has slapped its first fine on a brokerage firm for violating NAV transfer program procedures.

WASHINGTON -- Flexing their muscles, Securities and Exchange Commission officials from around the nation told a group of lawyers here that while cooperation with regulators is essential, the bar has been raised in terms of penalties and no firm will avoid getting its medicine.

As legislators and regulators prepare to adopt more stringent regulation governing the mutual fund industry, some investment advisors will benefit from such rule changes while others will be harmed, according to Fitch Ratings.

Warren Buffet, in his widely anticipated annual to his Berkshire Hathaway shareholders, blasts fund companies that cheated millions of investors through market timing and late trading, as well as directors who fell short of their duties. Funds are in dire need of "truly independent directors" willing to fire investment managers who overcharge on fees or fail to put shareholder interests first, Buffet said in his report. CEOs of fund companies are grossly overpaid, he added, holding directors, themselves richly paid, to blame. Buffet also referred to the sale of Strong Funds, without naming the firm, as "a travesty." The real "acid test" of whether current investigations into Wall Street will lead to meaningful change, Buffet said, is whether firms are willing to bring the pay scales of their chief executive officers back down in line with reality.

MFS Investment Management has hired a new chief counsel and a compliance officer to oversee corporate governance and compliance procedures in the wake of its $350 million settlement with regulators last month.