Regulation

Now, mutual funds don't have to feel quite so lonely. The Securities and Exchange Commission and New York Attorney General Eliot Spitzer have settled their first market-timing case against variable annuity issuers, with fines and disgorgement totaling $20 million.

The Securities and Exchange Commission is reconsidering proposals to curb market timing and eliminate late trading because the measures may unfairly affect pension plan participants and other long-term shareholders, according to the Government Accountability Office.

Strategic five-year plans are a fact of life to corporate executives. But for the Securities and Exchange Commission, the nation's top securities regulator, this year's newly released five-year plan spanning 2004 through 2009 took a lot of blood, sweat and tears and includes several lofty goals. These include stepping up examinations of investment companies deemed most at risk for problems, modernizing information technology systems, more aggressive hiring of both accountants and investment company examiners, and redesigning its pay, benefit and training programs for employees.

The former Evergreen Investments portfolio manager who was found to have engaged in allegedly improper trading of his own mutual fund shares likely was Prescott Crocker, former skipper of the Evergreen Precious Metals Fund and its High-Yield Bond fund, according to fund research firm Morningstar.

Piper Jaffray indicated in a recent filing with the SEC that the National Association of Securities Dealers has told the firm to expect disciplinary action for directed-brokerage arrangements it entered into with several fund firms. Directed-brokerage deals, prohibited by the NASD, involve fund firms sending trading business to brokerages as a form of compensation for the brokerage selling the funds. However, the practice has come into question because of a potential conflict of interest, whereby a broker may push unsuitable funds to investors so that it can reap the benefit of the trading commissions it receives. The firm contacted the NASD after the arrangements were uncovered during an internal review, and in response, the NASD said it "preliminarily has determined to recommend disciplinary action," according to the filing.

The Securities and Exchange Commission and the New York Stock Exchange last week fined Fidelity Brokerage Services $2 million for destroying or altering records in at least 21 of its 88 branch offices.

Janus Capital has had to withstand some face slapping from investors while it attempts to cure its ailing business, but it may soon run out of available cheek space as the hits keep coming.

Franklin Advisers wiped away some of the muck from the mutual fund trading scandal last week after agreeing to a $50 million settlement with regulators for its involvement in inappropriate trading of mutual fund shares.

Evergreen Funds confirmed that the SEC is investigating potential market timing at the firm and may bring an enforcement against it. The firm's parent company, Wachovia, first made the indication that a former employee as well as a portfolio manager may be charged in an SEC filing. An Evergreen spokeswoman indicated the firm intends to tell the SEC why enforcement action shouldn't be taken.

Following the Securities and Exchange Commission's new requirements regarding mutual fund boards and independent trustees, the Mutual Fund Directors Forum, at the request of SEC Chairman William Donaldson, has weighed in with its own set of 32 best practices. Donaldson made the request in November, just 2-1/2 months after the fund scandal broke, at a point when the SEC was finalizing a flurry of regulatory proposals to enhance board members' independence to stem further abusive activities.