Regulation

While we will certainly give credit to Eliot "The Steamroller" Spitzer for taking on illicit trading and sales activities in the mutual fund industry while he was New York attorney general, we wondered why, when he was running for governor, he accepted hundreds of thousands of dollars from hedge funds, which, after all, were at the heart of the scandal. It's entirely possible some of the funds that showered Spitzer with money conducted market timing or late trading. That would make his acceptance of their contributions a serious conflict of interest and, possibly, a tacit agreement not to indict them.

Despite a recent survey that found 83% of executives believe that the Sarbanes-Oxley Act has had a positive impact on their company, industry experts do not agree.

Lake Shore Asset Management, a Chicago-based hedge fund, had $288 million of its assets frozen by a federal court last week, after regulators stated it overstated its holdings, according to Bloomberg News.

John Hancock has settled with the Securities and Exchange Commission on charges that it failed to disclose $14.8 million in revenue-sharing agreements with 55 brokerages between 2001 and 2004. In exchange for the payments, the brokerages promoted Hancock mutual funds and variable annuities and gave the investment management firm's marketing and sales staff access to their representatives at conferences and meetings.

Increased international competition, proxy votes and Sarbanes-Oxley were a few of the issues discussed during the House Financial Services Committee's review last week of the Securities and Exchange Commission's effectiveness in investor protection and market oversight.

After a day's worth of discussion among industry executives, regulators, academics and investor advocates about the utility and future of 12b-1 fees, one theme emerged: something should be done.

Despite the hurly-burly set off by Securities and Exchange Commission Chairman Christopher Cox's request that Congress eliminate soft-dollar safe harbors, industry insiders argue that such a change will result in nothing but toil and trouble for retail investors.

The NASD collected roughly half the amount of fines in 2006 compared to 2005, taking in $84.9 million in 2006, compared to $134.3 million in 2005, according to its annual report. The NASD issued another $75 million in fines in 2006, compared to $148.5 million in 2005.

Regulation continues to weigh on fund executives' minds as their number-one concern, according to a PricewaterhouseCoopers survey of 400 senior finance executives at a forum last month.

The Securities and Exchange Commission announced that BISYS Group is paying $25 million in disgorgement and interest to settle charges of violating financial reporting, books and records and internal control provisions of the Securities Exchange Act of 1934.