Special Program Root Tag

NEW ORLEANS – As the industry verges on the edge of a full-fledged crisis, executives at the Investment Company Institute’s annual operations conference here opted not to speak bluntly about what needs to be done in the wake of potentially damning revelations by New York State Attorney General Eliot Spitzer.

Bank One’s fund family took a heavy hit in September, according to monthly fund flow figures released Friday by Lipper Inc.

The Securities and Exchange Commission’s probe into the mutual fund industry has now expanded to an investigation at the heart of how fund timing and/or late trading could have occurred in the first place: whether some fund companies allow large investors to peek at their holdings, officials told Reuters.

Barclays Offers First ETFs In a 401(k) Savings Plan

At least two fund groups have now experienced, firsthand, the impact of new requirements mandated with the enactment last year of the Sarbanes-Oxley Act. That legislative enactment aimed, among other things, to stem corporate fraud and make top executives accountable for the accuracy of financial reporting.

Even with the recent scandal unfolding in the fund industry, the Mutual Fund Integrity and Fee Transparency Act of 2003 is heading for its twilight rather than the limelight, industry observers said.

Separately managed accounts have become the hip product in the financial services industry in the past few years, with many traditional mutual fund firms now looking to penetrate the space. But one fund firm, Franklin Templeton, has been at it for years, and its deep distribution relationships and product breadth has enabled the company to garner $4.65 billion in assets. Money Management Executive Associate Editor Kevin Burke sat down with Franklin Templeton Private Client Group President and Chief Executive Officer Kent Strazza to talk about how his firm's experience in the field and strong fixed-income reputation enables Franklin to deliver a quality managed account product.

As recent events make clear, market timing continues to be a significant concern for the mutual fund industry. The launch of federal and state investigations into an array of mutual fund houses has created a wave of public pressure to ensure that small, individual investors are protected. It is inevitable that the fund industry will need to implement more effective solutions to eliminate market timing opportunities.

PFPC is offering a new service to help mutual fund companies meet the requirements of the customer identification program (CIP) regulations of the USA Patriot Act, which went into effect at the beginning of this month.

Further compounding employees’ retirement planning concerns, a new IRS ruling reduces by about 60% the amount they can withdraw without penalty before age 59-1/2.

Top-tier mutual fund distributors spend nearly $80,000 more in total sales per wholesaler, on average, than second-tier companies, according to a recent research by executive search and consulting firm DGL Consultants.

New York State Attorney General Eliot Spitzer mocked the fund industry’s "claim of purity," along with Congress and the Securities and Exchange Commission’s failure to detect the improper trading he has uncovered, the New York Post reports.

Massachusetts regulators issued subpoenas Thursday to employees of Fidelity Investments, Morgan Stanley and Franklin Resources, extending their market-timing probe at Prudential Securities, Reuters reports. Spokespeople for the three firms that have just now come under the inspection of Mass. Secretary of the Commonwealth William Galvin confirmed that they have received these requests for information.

The New York Stock Exchange announced Thursday it will seek fines of up to $150 million against five specialist firms for engaging in improper trading practices.

Cash compensation for wholesalers of investment products and services increased 3% in 2002, according to executive search and consulting firm DGL Consultants.

The Investment Company Institute's board of directors is forming two separate task forces to concentrate on preventing late trading and short-term trading. The board will ask each task force to work closely with the SEC, the NASD and other regulators to devise ways firms can "forcefully and effectively" prevent such abuses.

A high concentration of insurance companies in the state and a desire by Connecticut attorneys specializing in investment management to identify and confront industry issues, has spawned the formation of a new organization, the Investment Company Act of 1940 Attorneys' Association of Connecticut.

John Meier has joined Integrated Fund Services as client services director, in charge of senior relationship support.

Waddell & Reed recently announced the promotion of Nikki Newton to senior vice president and director of defined benefits. He previously was an institutional client representative in the asset management group.

KBD Securities, the broker/dealer for Kinetics Asset Management, advisor to the Kinetics Mutual Funds, has hired Scott Curtis as managing director of equity trading.