Dan Calabria, the former chief executive officer of Templeton Funds, criticizes the industry in a new book called “Mutual Funds Today: Who’s Watching Your Money?,” The Salt Lake Tribune reports.

Specifically, Calabria maintains that fund companies manipulate the use of 12b-1 fees to their advantage when they use investors’ money to pay for marketing, advertising fund reports and investor relations.

“I think 12b-1 fees are justified, but only as they were originally designed to help the fund sales operations support a servicing effort. But it’s become bastardized,” Calabria said.

He also is critical of fund companies taking up to nearly three months to send out fund prospectuses. By the time investors finally receive them, the information is so stale that they rarely read them, Calabria said.

As far as independent directors are concerned, Calabria, who himself has served on many fund boards, says it does make sense to tap into the pool of former executives since they understand the industry. “I think anyone invited onto a fund board shouldn’t have voting privileges for their first two years, and their compensation should be half the rate of experienced directors.”

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