My Yahoo!Taking Mutual Funds To Task
NEW YORK - Mutual fund inaction has brought about mutual funds in action.
The Investment Company Institute, the trade association for over 8,000 U.S. mutual funds, has mobilized two task forces to address improper trading granted to certain hedge funds. The goal is to "forcefully and effectively address the issues of late trading and abusive short-term trading," the ICI said in a statement. The ICI board of governors, comprised of top executives at major fund management firms, says the task forces will work with the U.S. Securities and Exchange Commission, NASD (formerly the National Association of Securities Dealers) and other regulators to implement a five-part plan set down by SEC Chairman William Donaldson at a Senate hearing earlier this week.
"Everything is on the table to protect mutual fund shareholders," said ICI Chairman Paul Haaga Jr., executive vice president and director of Capital Research and Management, which advises American Funds, one of the largest mutual fund families in the U.S. Haaga was re-elected to a one-year term as the industry group's chairman. Rejoining the board this year is John J. Brennan, chairman and chief executive of the Vanguard Group, a mutual fund family founded by investor advocate John Bogle, currently a leading voice for mutual fund governance reform. (See "Fund Manager Knows Best.")
One task force will specifically address issues related to late trading, a privilege New York Attorney General Eliot Spitzer alleged was granted to a large hedge fund on trading of Nations Funds, run by Bank of America (nyse: BAC - news - people ); One Group Funds, run by Bank One (nyse: ONE - news - people ); and certain Janus Capital (nyse: JNS - news - people ) funds. A second task force will focus on curbing abusive short-term trading such as market timing, a practice by which large investors would move quickly in and out of a fund to take advantage of stock price discrepancies in international equity markets. The composition of each task force has not yet been announced.
Just this past week, Prudential Securities, majority owned by Wachovia (nyse: WB - news - people ); Alliance Capital (nyse: AC - news - people ), owned by AXA (nyse: AXA - news - people ); and Smith Barney, a unit of Citigroup (nyse: C - news - people ), all disciplined or dismissed employees for reportedly facilitating improper mutual fund trading.
ICI said that it will "swiftly identify specific options--whether through government regulation, industry best practices or both." While the industry vows to work with regulators on the solution, a five-part regulatory action mentioned by Donaldson on Tuesday and repeated by ICI this morning still fails to bring mutual fund governance and disclosure in line with that of the publicly traded corporations held by mutual funds.
The task forces address only the issues at hand--late trading and market timing. If the industry knows what's best, it would take this chance to advance fund governance reform and discloure of direct costs to individual investors. (See "Mutual Funds, Heal Thyselves.")
More From Forbes
2003 Mutual Fund Survey 08.27.03Our annual survey.
 |
||
| 1 of 1
| ||
Subscriptions >
| Free Trial Issue of Forbes | Forbes Gift Subscription | ||
| Subscribe To Newsletters | Subscriber Customer Service | ||
| Buy Audio Version of Forbes |
| Trading Center |
|
|||||||||
| CEO Book Club | more > |
The Philosopher Kings Of HedgingSteven Drobny reveals insights from the hedge fund all-stars. |
||
Laissez Faire In The StudioAt Columbia Records, John Hammond made some of the greatest discoveries in American music. |
||
| Advanced Search | New & Notable | ||
|
|
|
