Compliance

MFS Investment Management has hired a new chief counsel and a compliance officer to oversee corporate governance and compliance procedures in the wake of its $350 million settlement with regulators last month.

NEW YORK -- Soft dollars and directed brokerage are appalling and must be eliminated. That's the tune we've been hearing almost uninterrupted for the last several months as regulators and lawmakers have unleashed the hounds on the fund industry. But not all are on board with the efforts to kill the practices.

Bank of America, the nation's third-largest bank, was slapped with a record $10 million fine last week for failing to comply with regulators' repeated requests for information during their probe of improper trading practices.

The National Association of Securities Dealers has slapped its first fine on a brokerage firm for violating NAV transfer program procedures.

Putnam Investments took the initial hit from the rash of sales and marketing executives defecting to Liberty Financial in the late 1990s, but it is Columbia, which since consumed Liberty, that is now poised to take a beating from the transaction.

The House Financial Services Committee passed The Securities Fraud Deterrence and Investor Restitution Act (H.R. 2179), which would permit the SEC to more easily collect fines and funds from those who have broken the law. It would also increase the amount of funds the SEC would be able to return to injured investors.

The number of mutual funds lowering fund-management fees is proliferating, and as the mutual fund scandal continues to unfold, this trend should spread, according to industry analysts.

Regulators are not just targeting those in cahoots with market timers. Now, any firm that failed to do enough to keep the wolves out of the pen is fair game.

The SEC's top regulators have chastised mutual funds. State regulators have fired harsh salvos at them. And to put it quite mildly, the national press has gone to town.

Canadian Imperial Bank of Commerce announced last Monday that it would pour $37 million to reform and educate employees on corporate governance. The funding is, in part, forced by a December settlement with federal regulators stemming from its links to the blown-up accounting practices at Enron.

Regulators have gone straight for the throat of FleetBoston, charging two of the company's Columbia units with orchestrating a "massive" market timing scheme and seeking to enjoin Columbia Advisors from serving as advisor to its own mutual funds.

The head of the world's No. 1 mutual fund company said last Tuesday that forcing firms to hire independent chairmen might not be the end-all solution to fixing problems in the industry.

James T. McCurdy, a 23-year veteran mutual fund auditor who was recently sanctioned by the Securities and Exchange Commission and given a one-year "time out" from the industry, has vowed to appeal that decision to the SEC's Commissioners, and will file for a stay of that penalty.

Understanding mutual fund statements should be a heck of a lot easier now that federal regulators have okayed new disclosure rules that would spell out more clearly the fees imposed on shareholders.

Fifteen brokerages settled with the SEC and NASD for $21.5 million for not providing customers with $86 million worth of breakpoint discounts they were owed. The deal, struck earlier this month, also requires the firms to repay investors what they are owed.

Registering with the SEC should not be a requirement of hedge funds, at least not in the mind of Federal Reserve Chairman Alan Greenspan.

Robert Pozen, Massachusetts Financial Services' newest chairman, says the punishment doesn't fit the crime at his new firm.

Three U.S. Senators introduced new legislation last week aimed at reforming the $7.4 trillion mutual fund industry. The Mutual Fund Reform Act of 2004 would not only stamp out abusive trading practices but also overhaul the hidden fee structure imposed on shareholders.

Franklin Resources last week said that improper trading of its mutual fund shares were isolated incidents that do not reflect widespread company abuses and didn't harm long-term shareholders.

President Bush proposed last Monday a $913 million budget for the Securities and Exchange Commission, one that would represent a 13% increase in available funds for the regulatory agency.