Kathryn Mcgrath

On Kathryn McGrath's final day last week as the nation's top mutual fund cop, the Securities and Exchange Commission paid her a fitting tribute: It voted for a sweeping public review of the 50-year-old federal law that created the modern mutual fund industry. For 36 million fund shareholders, the SEC review will offer an opportunity for comment on how well the funds serve investors and how the industry can be improved in the 1990s.

On Kathryn McGrath's final day last week as the nation's top mutual fund cop, the Securities and Exchange Commission paid her a fitting tribute: It voted for a sweeping public review of the 50-year-old federal law that created the modern mutual fund industry. For 36 million fund shareholders, the SEC review will offer an opportunity for comment on how well the funds serve investors and how the industry can be improved in the 1990s.

State health officials on Saturday expanded their warning about a potentially lethal mix-up in the packaging of a prescription drug to include 14 clinics, a pharmacy and six doctors' offices in Los Angeles, Orange and Riverside counties.

Dreyfus Strategic Aggressive Investing Fund was the most successful mutual fund in the second quarter, up 42.5% in a period when the Dow Jones industrial average rose less than 6%. Strategic Investing's edge was that it used options and stock-index futures to achieve a very large portion of its gains. And Howard Stein, chairman of Dreyfus Corp., the $33-billion (assets) parent company of Strategic Investment and more than two dozen other funds, thinks that's the start of a trend.

The Securities and Exchange Commission has narrowed its probe of Los Angeles-based American Funds to the question of whether the firm overpaid brokerages for trades as a reward for mutual fund sales, according to people familiar with the inquiry. The fund giant already is fighting two other regulatory agencies over charges of improper practices.

The Securities and Exchange Commission on Thursday approved two rules that are likely to make it far easier for investors to evaluate mutual fund fees and performance. In a long-awaited decision, the agency approved strict guidelines that will require advertisements for income and equity funds--if they choose to display performance figures at all--to disclose at least their annualized total returns over the most recent one-, five- and 10-year periods.

As competition in the mutual fund business grows increasingly intense, more players in the industry appear willing to sacrifice integrity in the name of performance. For a $2-trillion business built on public confidence, this trend is disheartening at best and downright dangerous at worst.

Sarah Rosen lost money in a bond mutual fund in 1994, and now she's suing to get it back. But unlike most of the suits that have been filed by disgruntled fund shareholders reeling from the worst bond market losses in this century, Rosen isn't alleging that a pushy broker sold her something she didn't understand.

Something good will come out of the mutual fund industry's current mess: More shareholders will start asking questions about fund practices that have nothing to do with abusive short-term trading but cost the average investor far more over time. Take, for example, the widespread imposition of so-called 12b-1 fees.

The new chairman of the Securities and Exchange Commission pulls up to work each day in a red Porsche with a vanity license plate, "1RCB1," and a bumper sticker that says, "Nuke the Duke." A beeper on his belt and a fax machine in his Virginia home keep him in touch with his staff. Six clocks, newly mounted on his office wall, remind him of the trading hours of stock exchanges in London, Chicago, New York, Sydney, Tokyo and Hong Kong. Richard C.