Funds Not Alone in SEC's New Compliance Crusade

If you are looking for corporate integrity, check out the mutual funds. In our lifetime, we have seen major scandals or collapses of the banks, savings and loans institutions, the life insurance industry, big businesses - even religious organizations.

Harvard/Templeton China Fund Fight Turns Ugly

President Bush's plans to radically change the way Americans save for retirement offer many interesting proposals, due to their simplicity and their availability for all. But it remains to be seen whether Congress will pass these sweeping changes into law.

An inadvertent administrative glitch can be a fund advisor's worst nightmare, especially when the renewal of a fund's advisory contract is botched.

Saying that the gigantic growth of the fund industry has stretched its resources to the limit, the Securities and Exchange Commission asked fund companies last Tuesday to consider appointing chief compliance officers and put internal compliance programs in writing. More significantly, the SEC asked the public and the industry to comment on the creation of a mutual fund self-regulatory organization (SRO), much like the National Association of Securities Dealers, to work in tandem with the SEC.

Let's not have another chad fiasco like the one that happened in the last presidential election.

The Securities and Exchange Commission announced last Thursday that it will require mutual funds and their investment advisors to disclose their proxy votes and have fund executives certify the accuracy of their financial statements. Subject to further review by the Office of Management and Budget, the proxy requirement could take effect as early as this summer, as the SEC is recommending annual release of this information on or before Aug. 31 of each year. The commission is recommending that fund companies have the choice of posting the files on their Web sites or making them available in hard-copy form. As to the timetable for certification, a spokesman for the SEC could not specify when the certification requirement could take effect.

Investing in a variable annuity in a tax-deferred retirement plan has long been the target of industry critics, but this month a New York law firm did more than just harp on the practice. It filed a lawsuit against it.

WASHINGTON - Securities and Exchange Commission officials intend to finalize a controversial proposal to force mutual funds to disclose how they vote in proxy decisions this week.

Securities and Exchange Commission Chairman Harvey Pitt this month urged mutual fund directors to ensure that their investors are not being overcharged by brokerage houses in the form of fees levied on securities transactions (see MFMN 1/13/03).

WASHINGTON - Four former chairmen of the Securities and Exchange Commission said last week that directors of mutual fund boards need to do a far better job of monitoring the funds they oversee and prevent the kind of fraud that has run rampant on Wall Street the past year.

Talk about going out and seeing America.

While Wall Street ripped roariously with scandal after scandal in 2002, the fund giants appeared to sit sanguinely on the sidelines. Insiders, on the other hand, know that the mutual fund industry didn't quite get by without a few scrapes of its own.

In a move that has been condemned by the mutual fund industry, The Securities and Exchange Commission last week endorsed a proposal that would force complexes to disclose their portfolio holdings four times each year. Funds currently have to disclose the information twice a year.

The Investment Company Institute has dismissed a Securities and Exchange Commission initiative that would require fund companies to disclose how they vote on proxies, insisting that the proposal would favor political groups and pose a risk to shareholders and fund complexes.

The National Association of Securities Dealers of Washington has won a legal battle against a publisher who uses NASDR data about broker/dealers. A federal court in Florida dismissed a lawsuit brought by the publisher, Edward Siedle, who demanded access to NASDR data, saying NASDR could restrict information that appears on its public disclosure Web site and how that information can be used.

He got the markets running in less than a week after the terrorist attacks of 9/11 and waged the most aggressive reforms in the history of the SEC. In the end, it was his own bravado (wanting to be named to the Cabinet) and impediments to true bottom-line numbers (through his poor choice of chairman of the Public Company Accounting Oversight Board and conflict of interest over his previous work for AOL), that took Chairman Harvey Pitt down.

The 401(k) reform bills that have been brewing in Washington for the past year will likely be tabled until the 2003 session of Congress.

Firms Scramble Ahead of SEC Decision to Comply With Law