WEST PALM BEACH, Fl (HEDGECO.NET) – Just when investors think the mutual fund scandals are behind them, a new phase of investigations is initiated. This time the US Securities and Exchange Commission[SEC] is directing its full attention on mutual fund brokerage abuses. According to SEC regulators, their probe shows that there were widespread brokerage abuses involving the mutual fund industry.

The government agency disclosed that it is now actively conducting an investigation of the degree and magnitude of such abuses. Based on SEC�s initial findings, eight-broker dealers and twelve mutual fund companies are currently being examined, dozens more would be added to the list, an SEC spokesperson said.

These preliminary findings were disclosed at a time when the government agency was about to introduce new proposals requiring brokerage companies and mutual fund organizations to beef up their transparency provisions to investors particularly relating to fees and conflict of interest matters. Commenting on this issue, Stephen Cutler, the head of enforcement for SEC said, �A customer has the right to know where the incentive is [for the broker]�

Last November in its �revenue-sharing� probe, the SEC fined Morgan Stanley $50million for its failure to inform its investors that some kickbacks were funneled to its brokers to help in the promotion of certain mutual fund companies. That probe showed that of the 15 brokers examined by SEC, 14 brokers had received some cash payments from some fund companies. Between $50 and $400 were paid for every $100,000 of mutual fund sale, and up to $250 if such asset were reinvested in the fund. According to SEC, some brokers granted special promotion activities to the funds providing such payments.

The director of SEC�s office of compliance, Lori Richards explained that as a result of the SEC examinations, the agency concluded that �revenue sharing� was a wide spread practice within the mutual fund industry, adding that most mutual fund companies denied to her office staff, that broker commissions were at all used to pay for sales and distribution of products. The SEC�s new proposals would force brokers-dealers and mutual fund groups to provide for the general public all and any of their assessed fees and charges.

Paul Oranika
Editor-in-chief
Hedgeco.net

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WEST PALM BEACH, FL (HEGECO.NET) – Just when investors think the mutual fund scandals are behind them, a new phase of investigations is initiated. This time the US Securities and Exchange Commission[SEC] is directing its full attention on mutual fund brokerage abuses. According to SEC regulators, their probe shows that there were widespread brokerage abuses involving the mutual fund industry.

The government agency disclosed that it is now actively conducting an investigation of the degree and magnitude of such abuses. Based on SEC�s initial findings, eight-broker dealers and twelve mutual fund companies are currently being examined, dozens more would be added to the list, an SEC spokesperson said.

These preliminary findings were disclosed at a time when the government agency was about to introduce new proposals requiring brokerage companies and mutual fund organizations to beef up their transparency provisions to investors particularly relating to fees and conflict of interest matters. Commenting on this issue, Stephen Cutler, the head of enforcement for SEC said, �A customer has the right to know where the incentive is [for the broker]�

Last November in its �revenue-sharing� probe, the SEC fined Morgan Stanley $50million for its failure to inform its investors that some kickbacks were funneled to its brokers to help in the promotion of certain mutual fund companies. That probe showed that of the 15 brokers examined by SEC, 14 brokers had received some cash payments from some fund companies. Between $50 and $400 were paid for every $100,000 of mutual fund sale, and up to $250 if such asset were reinvested in the fund. According to SEC, some brokers granted special promotion activities to the funds providing such payments.

The director of SEC�s office of compliance, Lori Richards explained that as a result of the SEC examinations, the agency concluded that �revenue sharing� was a wide spread practice within the mutual fund industry, adding that most mutual fund companies denied to her office staff, that broker commissions were at all used to pay for sales and distribution of products. The SEC�s new proposals would force brokers-dealers and mutual fund groups to provide for the general public all and any of their assessed fees and charges.

Paul Oranika
Editor-in Chief
Hedgeco.net