Regulators' investigations into misdeeds in the fund industry are not over, and as a result, fund executives can expect even more regulations in 2005, according to a CBSMarketWatch editorial.

Cases against variable annuities in the coming year could become so prevalent that they could become the fund scandal's "second wave," CBSMarketWatch predicts.

Shareholders and boards, meanwhile, will join forces with regulators to launch an attack against 12b-1 fees, arguing that funds keep them in place to pay trailing commissions rather than as they were designed: to raise money to create economies of scale so that they can then be removed.

But despite all of the new rules, the bigger question of whether investor trust has been restored remains to be seen. Realizing that shareholders are unlikely to pay attention to all of the new disclosures, such as portfolio managers' pay structure and payments for shelf space, fund data services like Lipper, Morningstar and Value Line will launch new measures and services based on this new information. Hopefully, this improved transparency will reinstate investor trust.

Another prediction for the coming year is that a handful of independent directors will rise to the occasion of their new empowerment under independent chairmen to challenge fund management on such issues as the wisdom of keeping a fund with poor performance alive. While CBSMarketWatch doesn't expect a rash of proxy fights, it does foresee the beginning of a new age of authorization among boards.

The outcome of these cases will determine just how successful the reforms really are and whether, in turn, they can re-establish the faith.

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