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News and Press Releases |
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HEADLINE:
SEC Mutual Fund Proposals Criticized As Not Enough
By: Mark Wilkinson - Reuters
Forbes.com. December 3, 2003
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EXCERPT: New Securities and Exchange Commission proposals made on Wednesday aimed at cleaning up the mutual fund business were criticized by the officials leading the probe of the industry as just a first step in tackling abuses. The SEC proposals -- which would crack down on after-hours trading and enhance disclosure -- came after three months of turmoil in the $7.2 trillion industry, under close scrutiny from federal and state regulators probing improper trading. Securities regulator William Galvin of Massachusetts, the nation's mutual fund center, said the proposals were a step in the right direction but that stronger laws were still needed. "They're an OK first step," Galvin told Reuters in an interview, characterizing the SEC's proposals as "better than nothing." "But they shouldn't be seen as a substitute for more comprehensive legislation," he added, saying a bill already introduced on Capitol Hill that would force funds to disclose more about their fees would help. New York Attorney General Eliot Spitzer told MSNBC that the planned rules were "a beginning." Among the proposed rules is a measure to end late trading, or selling and buying fund shares after the market officially closes at 4 p.m. (2100 GMT) -- something that Spitzer has likened to betting today on yesterday's horse race. The SEC also wants funds to appoint chief compliance officers, who will report to the company's board, to oversee how portfolios are managed. Galvin and Spitzer have long accused the SEC of being too close to the financial businesses they regulate. Earlier this month, Galvin said he was outraged at the regulator's "willingness to compromise with the industry." The probe into the mutual fund business was launched in September by Spitzer -- a Democrat thought to have ambitions of becoming New York's governor. Since the probe began, bills have been introduced in Washington to clean up the business. The industry welcomed the initiative. "This is a good news for shareholders," said Chris Wloszczyna, a spokesman for the Investment Company Institute, the mutual fund industry's Washington lobby group. But critics questioned what the rules could really do. The late trading rule "is an absolutely minute detail and will make no difference," said Lou Harvey, president of Boston-based research firm Dalbar Inc. "The SEC is making a lot of noise but doing very little." Roy Weitz, of industry watchdog FundAlarm.com, decried the SEC's lack of a long-term plan to reform the mutual fund business, which handles the investments of about 48 percent of U.S. households.
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