Despite falling behind early to New York Attorney General Eliot Spitzer’s cffice, the Securities and Exchange Commission has gained its war footing against unethical mutual fund companies, a new General Accounting Office report says.

A history of not "being able to anticipate potential problems and identify the extent to which they exist," according to the GAO, is a problem the SEC has always faced thanks to limited resources. That causes the Commission, not because of fault but rather because of lack of funding, to be reactive rather than proactive, as it was in the mutual fund scandal.

But the GAO concluded that ever since Spitzer’s office acted on a tip and made a run at the fund industry, the SEC and also the National Association of Securities Dealers "have acted vigorously to address inappropriate practices in the mutual fund industry."

As far as the challenges the SEC faces, the GAO said that obtaining and using new technology and timely anticipation of problems will continue to remain a problem as long as finances run low. The report offered no solutions, but did cite many of the good things the Commission has done, such as a redemption fee proposal and strict 4 p.m. trading deadline suggestion.

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