“It’s hard to imagine that Peter Wallison is serious,” worte Bogle of Wallison’s contention that directors need not be concerned with setting fees for investors. Wallison compared boards to local utility commissions. Such commissions stifle free market forces, he said. Bogle countered: “It flies in the face of common sense.”
Fund boards don’t set fees; they approve structures set by the advisors, Bogle said. Contrary to Wallison’s assertion they typically do consider the advisors’ costs, he asserted.
Bogle points to
Los Angeles-based
The Investment Company Act of 1940 demands that mutual funds keep the best interest of the investor at heart, he said. “Eliminating fee-monitoring authority of the fund board would belie that sound public policy,” he said.
The real way to bring competition is to put the power in the hands of shareholders, said Bogle. That means more independent directors, and independent chairman and a small staff to support them. Each of these is a proposal before
“To step back from these reforms is to continue to empower the adviser fox to watch the mutual fund henhouse,” Bogle wrote.
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