Wealth Think

Fines, being barred from the industry and even facing years behind bars evidently won't deter some market timers looking for a quick, sure buck.

The President's Working Group on Financial Markets will form two private-sector groups to develop best practices for the hedge fund industry, and while it comes far short of requiring hedge funds to register with the Securities and Exchange Commission, this is welcome news, both for investors and the market.

Of the 14 regulations that came out of the mutual fund trading scandal, the two most important were the creation of a chief compliance officer and the requirement that three-quarters of a fund's board of directors, including its chairman, be independent.

Lifecycle funds are now taking another punch, and while this one may not be fully merited, it is one that fund companies might want to consider as a roadmap to improving such funds' performance and marketability.

When Peter Scannell appeared before Congress to testify about market timing at Putnam Investments, he hardly appeared the picture of a valiant hero. Scannell was somewhat incoherent, his written testimony riddled with misspellings, according to one of our reporters who was there.

The Department of Labor estimates that automatic enrollment in 401(k) plans, as protected under the Pension Protection Act, will add between $45 billion to $90 billion a year to the plans, which had $3.6 trillion in assets under management in 2006, according to the Investment Company Institute.

While mutual fund companies and investment banks have had meteorologists on their trading desks for almost 30 years, the practice apparently is increasing-affecting portfolio managers' trading decisions not only of commodities, power, utilities, agriculture and energy securities, but also consumer goods, transportation, construction, infrastructure, shipping and leisure. In addition, in the past 10 years, the insight of meteorologists on the trading floor has led to the development of weather risk management tools-futures, derivatives and insurance.

The subprime mortgage crisis appears to be spreading beyond the credit markets, dampening not only the U.S. stock market, but also international markets.

While we will certainly give credit to Eliot "The Steamroller" Spitzer for taking on illicit trading and sales activities in the mutual fund industry while he was New York attorney general, we wondered why, when he was running for governor, he accepted hundreds of thousands of dollars from hedge funds, which, after all, were at the heart of the scandal. It's entirely possible some of the funds that showered Spitzer with money conducted market timing or late trading. That would make his acceptance of their contributions a serious conflict of interest and, possibly, a tacit agreement not to indict them.

We've got to hand it to the board of directors at AIM Investments for acting responsibly and in direct response to a profound change in public sentiment.