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Mutual Funds: Portfolio Structures, Analysis, Management, and Stewardship by John A. Haslem, Ph.D.

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CHAPTER 16
Identifying Mutual Fund Stewardship
JOHN A. HASLEM, Ph.D. Professor Emeritus of Finance, Robert H. Smith School of Business, University of Maryland
 
 
 
The Investment Company Act . . .places the stewardship of investor assets over the salesmanship of the. . .“ products” of the advisers. [When problems occur,] the issue is not people with investment problems, it is investments with people problems.
—John C. Bogle, “Has Your Fund Manager Betrayed Your Trust?”
 
 
 
The year 2003 unleashed a scandal of huge proportions in the mutual funds industry. These revelations brought forth intense feelings of shareholder betrayal, anger, dismay, and financial loss to the millions whose assets were improperly and illegally diminished And, these emotions were rightly justified. TIME magazine’s Thottam (2003) reports that 50 percent of 88 scandal-plagued funds had special arrangements allowing market timing, 30 percent assisted market timers to “cover their tracks,” 10 percent reported possible late trading, and three funds approved market timing.
Former New York Attorney General Spitzer found numerous and disturbing incidents of illegal and improper behavior, which illustrated ever so graphically the need for tough reform of the industry. But the scandal did not bring forth significant reform with real sunlight on fund advisers, operations, costs, and fees. Certainly, objective students of the funds industry agree that shareholders deserve much greater protection and real transparency. ...

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