Practice

The fund industry's most prominent shareholder advocate is urging Congress to create an oversight board to protect mutual fund shareholders from fraud.

Half of the companies that the Securities and Exchange Commission has contacted with regards to improper trading have reportedly admitted wrongdoing. Forty-four of the 88 companies who've received letters from the SEC have allowed some form of market timing - including firms whose own policies clearly disallow the practice. Not as many companies have admitted to late trading, however.

If the Securities and Exchange Commission approves a filing by DTCC, the not-for-profit clearing and settlement giant, best known for its work for the mutual fund industry, it will be able to do the same for separately managed accounts.

NEW ORLEANS - Regulators at the Investment Company Institute's Operations Conference here, in the crescent city, said they will be focusing more on electronic communications and management's attitude towards internal controls as they go forward, in an attempt to be more proactive in examining firms' internal controls.

At least two fund groups have now experienced, firsthand, the impact of new requirements mandated with the enactment last year of the Sarbanes-Oxley Act. That legislative enactment aimed, among other things, to stem corporate fraud and make top executives accountable for the accuracy of financial reporting.

Even with the recent scandal unfolding in the fund industry, the Mutual Fund Integrity and Fee Transparency Act of 2003 is heading for its twilight rather than the limelight, industry observers said.

New York State may have changed the way mutual fund companies compete in the 529 college savings plan market.

The downward pressure on 401(k) and other retirement plan balances over the past few years will mean problems for employers - but especially for the millions of workers who are ill-prepared to fund their retirement.

Those who have maintained the holier-than-thou attitude of the mutual fund industry and have believed that this scandal, too, shall pass, shouldn't kid themselves. It's time for the industry to turn in its halo.

Insidious greed notwithstanding, corporate governance is the Achilles heel of U.S. public companies. The analyst research scandal, the collapse of Enron and WorldCom and alleged illegal trading practices in the mutual fund industry all could have been prevented had there been sound corporate governance teams in place.