Federal Reserve Chairman Alan Greenspan and U.S. Treasury Secretary John Snow on Tuesday called for swift punishment for individuals convicted in the widening mutual fund scandal, Reuters reports.
In letters to the U.S. Senate and House of Representatives, which have held a series of hearings on mutual fund trading practices the last two weeks, Greenspan and Snow commended their efforts to restore investor trust. But Greenspan and Snow stressed that legislators should keep certain principles in mind
Among them were requests that any proposed legislation include ensuring that disclosure requirements are designed to give investors real value. They also stipulated that fund fees are "fully subject to the competitive tests of the marketplace" and that criminals who "use mutual funds to steal from investors" are punished swiftly to preserve trust.
The Senate Banking Committee, chaired by Senator Richard Shelby (R- Al), held a hearing Tuesday on the mutual fund trading scandal. Witnesses included Securities and Exchange Commission Chairman William Donaldson. Critics have charged that SEC was slow to recognize obvious cases of fraud in the $7 trillion industry.
State regulators and the SEC have been looking at a range of mutual fund abuses ranging from illegal late trading, to secret commissions to brokers who push certain funds and to allowing preferred customers to trade rapidly in and out of funds using stale prices.