Fund Industry Has Bigger Hills to Climb than Capitol Hill:Real Reform to Take Place at SEC - Analysts

Despite the recent hearings in Washington to address the flaws in the mutual fund industry (see special "Fundgate" report in this week’s Money Management Executive), new reform proposals do not address some of the main fund problems – namely market timing and late trading – analysts said Monday.

Although proposals for clearer disclosure have been presented, the key issues of market timing and late trading have been spoken about but not mentioned in any bill.

"It's nonsense and no effort whatsoever," said Lou Harvey, president of Dalbar Inc., told Reuters, commenting on last week’s hearings. "What the fund industry needs right now is fundamental reform."

A recent bill proposal by Sens. Joseph I. Lieberman (C-CT) and Daniel Akaka (D-HI) seeks the reporting of compensation for brokers and portfolio managers and the raising the ratio of independent board members to 75%.

However, a mutual fund bill hat didn’t pass through in July is being brought back into the fray, with possible additions of market timing and late trading still pending. Sen. John Kerry (D-MA), who is running for president and just fired his campaign manager yesterday, is said to be spearheading that effort.

Several analysts have said that with its reputation lower than ever, the industry would be foolish to fight many new regulations.

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