WASHINGTON – Governmental Affairs Committee Ranking Member Joe Lieberman, D-Conn., Thursday commended Senators Chris Dodd, D-Conn., and Jon Corzine, D-N.J., for proposing mutual fund industry reform that covers ground similar to Lieberman’s proposals to make the industry more accountable to its investors. Lieberman said comprehensive reform legislation must:
· Strengthen the independence and effectiveness of mutual fund boards by increasing the number of independent directors, installing a compliance officer reporting directly to independent directors and limiting the number of boards on which any one member can serve · Require clearer disclosure to investors in their monthly statements of all fees, expenses, and other fund costs · Require comparative information of fees among funds · Implement a strict time deadline for trades to arrive at the mutual fund · Use consumer research to make fund materials more understandable to the average investor · Improve the Securities and Exchange Commission’s examinations of mutual funds to more effectively detect abuse In a letter to SEC Chairman William Donaldson, dated November 3, 2003, Lieberman outlined the six points listed above and criticized the SEC for failing to detect mutual fund industry abuses which include favored treatment of large investors and personal profit by fund officials at the expense of their customers. Lieberman has co-sponsored reform legislation with Senator’s Daniel Akaka, D-Hi., and Peter Fitzgerald, R-Ill., but lauded Dodd and Corzine for requiring additional prescriptions similar to those Lieberman outlined in his letter to Donaldson. “Mutual fund investment is, for many Americans, the path to their kids education and their own retirement,” Lieberman said. “These working families must be assured that their investments are handled honestly and transparently. I look forward to working with Senators Dodd and Corzine, as well as Akaka and Fitzgerald, to make sure this happens.” As Governmental Affairs Committee Chairman in 2002, Lieberman examined the malfeasance of Enron Corp., and the Wall Street analysts whose conflicts of interest led them to recommend worthless stock to unsuspecting investors. The Committee staff produced a report in October 2002 that charged the system of public and private financial watchdogs with “systemic and catastrophic failure” to protect investors from fraud and abuse. The SEC’s failure to detect mutual fund industry abuses is reminiscent of the agency’s failure to catch onto Enron Corp.’s deceptions.