Year-Old Fund Scandal Has Changed Industry

Published September 20, 2004, 1:00 a.m. EDT

Updated September 20, 2004, 1:00 a.m. EDT

1 Min Read

When Morningstar handed a Newsweek reporter a sheet of paper listing the assets under management for the 21 firms touched in the mutual fund scandal, it became obvious that the investigation begun by Eliot Spitzer just over a year ago had shaken the industry.

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Not counting PIMCO, a firm that has managed to weather the storm despite a $50 million fraud settlement with the SEC, the aggregate assets of the tarnished fund firms pointed were in the red, while the assets of the industry as a whole pointed upward.

While the first wave of Spitzer's probe focused on nuanced infractions like market timing, the New York Attorney General has moved on to challenging high fees, a move he believes will encourage healthy competition in the marketplace.

Already, nine fund companies have shelled out a total of $3.2 billion in, not just fines and compensation, but in fee reductions as well. Furthermore, Newsweek reports that the four most egregious companies Putnam, Strong, Janus and PBHG  have lost between 17% and 24% in assets. As a whole, the industry has seen an increase of 17%.

While admitting that "things still aren't perfect" like the fact that no anti-late trading legislation has yet been introduced Newsweek conceded that the lower fees have done what they are supposed to do help investors.
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The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.