Compliance

To restore industry confidence and nudge investors' interests back to the forefront, the Investment Company Institute told the SEC last Monday it supports the curtailing of soft dollars and banning of "directed brokerage." Commenting on the proposal, ICI Chairman Paul G. Haaga, Jr. said the proposed changes would "benefit fund investors by substantially diminishing potential conflicts of interest and strengthening the operating integrity of mutual funds."

(Reprint from 12/9/02 MFMN)

If we were to stage a "Best of" show about the year's impact on job prospects, Eliot Spitzer would be a good choice to serve as our affable host. And you, as a compliance professional, would no doubt have a chance to walk up to the stage, collect your trophy, and give the New York Attorney General your personal thanks for improving your job prospects tenfold.

Not all scandals are created equal. As such, Invesco Funds is apparently digging in its heels and preparing for a dogfight with regulators, a stark contrast to the "yes siring" going on at firms accused of more outrageous activities.

Noreen Harrington, a former executive of the Stern Asset Management arm of the Hartz Group, identified herself as the initial whistleblower in the mutual fund scandal that has ravaged the industry, according to reports.

Mutual fund managers are tipping their caps to interim chief John Reed as the New York Stock Exchange preps itself for a makeover. But industry lobbyists suggest that the proposed governance structure fails to provide adequate representation.

New York Attorney General Eliot Spitzer arrested three former executives of Security Trust Co. on felony charges last Tuesday. His suit charges the men with grand larceny in the first degree, for stealing more than $1 million.

Morningstar has recommended that investors dump shares of 11 PBHG funds after its founders were charged with securities fraud for allowing two of the firm's clients to trade billions of dollars in and out of its funds.

Viewed as watchdogs by some and lapdogs by critics, mutual fund boards have arguably seen their responsibilities grow alongside the complexity and demands of the business. Directors have recently come under fire as a result of Eliot Spitzer's probe into fund trading, as they were presumably unaware of the violations. Questions of board due diligence and the adequacy of the governance structure obviously emerge.

Alpine Management & Research, Purchase, N.Y., has introduced a unique dividend-paying fund that it claims is more active than many new offerings designed to take advantage of the latest tax laws favoring qualified dividends.

House Passes Baker Bill, Updated to Address Scandal

Think mutual fund investors are the only ones trying to decipher which sponsors have been naughty and which have been nice?

WASHINGTON - Testifying before the Senate Banking Committee last week, SEC Chairman William Donaldson called for the formation of a new risk assessment unit to circumvent abuses in mutual funds and other investments.

Members of the House of Representatives voted overwhelmingly (418-2) Wednesday to approve the Mutual Funds Integrity and Fee Transparency Act, also known as the Baker Bill.

Federal Reserve Chairman Alan Greenspan and U.S. Treasury Secretary John Snow on Tuesday called for swift punishment for individuals convicted in the widening mutual fund scandal, Reuters reports.

Fund managers placing their own interests ahead of those invested in the funds.

Brace yourselves. Recent problems in the mutual fund industry with market timing arbitrageurs could spill over into the variable annuity industry.

The mutual fund industry, while still viable and in position to bounce back, needs drastic changes and needs them now, Securities and Exchange Commission Chairman William H. Donaldson said in a sometimes scathing, sometimes positive speech.

NASD Probes B/D Sales Of College Savings Plans

Fund industry executives who thought they might dodge the scandal bullet had their odds reduced drastically last week.