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House Hearing to Examine Mutual Fund Trading Abuses

The review would look at the need for new legislation addressing the industry scandal.

October 29, 2003|From Bloomberg News

Rep. Michael G. Oxley (R-Ohio), chairman of the House Financial Services Committee, has called a hearing to examine whether Congress may need to enact new legislation to address alleged trading abuses in the $7-trillion mutual fund industry.

"We've seen a number of extremely disturbing revelations concerning the mistreatment of mutual fund investors," said Rep. Richard H. Baker (R-La.), who will lead the hearing as the House Financial Services subcommittee on capital markets, according to a statement.

Baker said the disclosures about alleged market timing by some traders in some mutual funds to the disadvantage of other investors called for a congressional review to see whether new restrictions were necessary.

The Financial Services Committee approved a bill July 23 calling for greater disclosure of mutual fund fees and changes in how mutual funds are governed.

New York Atty. Gen. Eliot Spitzer began revealing the alleged trading abuses in September.

Federal and state regulators are examining trading practices at about 80 firms, including Putnam Investments, Merrill Lynch & Co., Alliance Capital Management Holding and Bank of America Corp.

The revelations raise the question of "whether our proposed legislative reforms for mutual funds go far enough," said Baker, who wrote the committee-approved mutual funds bill.

The hearing is set for Nov. 4 to examine the latest allegations about mutual fund trading abuses.

Witnesses will include Securities and Exchange Commission Enforcement Director Stephen M. Cutler, Massachusetts prosecutor William Galvin and Spitzer.

The House hearing is scheduled to take place one day after the Senate Governmental Affairs financial management subcommittee holds a hearing on mutual funds with some of the same witnesses. About 95 million Americans invest in mutual funds.

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