The past few days have seen the investment management industry get two black eyes. Investors are seeking $100 missing from the Bayou hedge fund, and the head of Canada's mutual fund association resigned in disgrace, with $70 million missing from his own firm, Norbourg.

Canadians are said to be reeling from last week's police raids. Now, in a Montreal Gazette editorial, the paper is calling for a voluntary insurance fund for mutual fund fraud, with the bill footed by the companies themselves.

Nobody should have to be insured against losing money from a bad investment, according to the Gazette, but with insured and uninsured companies in the mix, mutual-fund investors would have a choice. And making choices is, after all, what people do when they buy mutual funds.

The editorial goes on to talk about how the Norbourg case suggests that regulators need to find more artful ways to invite themselves into problematic situations before they get worse. One way to do that might be to suspend company operations, however temporarily, for the most routine violations - even as minor as failing to file quarterly reports on time. A zero-tolerance attitude toward even low-grade imperfections would surely have some "trickle-up" effect, reducing the incidence of bigger problems.

Norbourg's 5,000 unfortunate investors, meanwhile, can only wait to see how much money can be recovered. If significant sums are really gone, they will have no hope of indemnification, apart from class-action suits.

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