The Securities and Exchange Commission has taken some positive steps in examining mutual fund companies but more could be done, according to a Government Accountability Office report released Tuesday.

The GAO stressed in particular that the failure to detect trading abuses stemmed from the SEC's focus on other activities, which the Commission believed presented higher risks. The GAO recommended several ways by which the SEC could keep tabs on compliance issues at mutual fund companies: conducting independent assessments of controls in areas such as market timing; developing its capacity to identify and evaluate evidence of potential risk; and ensuring the independence of company compliance staff.

The GAO pointed out certain effective steps that the Commission had taken but still punched holes in them. For instance, the GAO said that while the SEC had adopted a rule requiring mutual fund companies to appoint independent compliance officers to prepare annual reports on their companies' policies and violations, it had not put in place a mechanism by which to receive and review those reports on an ongoing basis.

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