Evening star. [volume] (Washington, D.C.) 1854-1972, 1962-12-31
YOUR MONEYS WORTH
Mutual Funds
Standing Pot
BY SYLVIA PORTER

care. But we are not the peo-
pie who can enforce an i'm
provement Of standards"
The ICI did recently appoint
a six-man committee of its
own members Ito discuss with
the SEC any ideas it wants to
discuss, including the question
of self-regulation." When SEC
Chairman William L. Cary
a month ago accused the mu-
tual fund industry of being one
lin which self regulation has
been greatly rejected" Charles
H. Schimpff, chairman of the
institute reported that he
couldn't understand the accu-
sation when this is a question
we have only begun to explore.
Nevertheless. despite this
move. mutual fund leaders take
the attitude that they are not
only innocent Of Mr.. Cary's
charge Of rejecting self-regu-
lation" but they also are legally
powerlesS to punish any wrong
doors in the mutual fund field.
Under its present setup as
a voluntary organization, says
Mr.. Richardson, the institute
can only use moral suasion"
to lift industry standards. The
ICI has not the authority to
crack down on, say, q high
pressure salesman who fast
talks a 65-year retired worker
into signing a 10-year contract
to buy mutual funds at excess
sively high commissions. It
cannot audit the books Of an
investment company suspected
Of conflict of interest or inter-
locking deals.
Many mutual funds feel 1t
would be a tremendous advan-
tage to have frequent inspec-
tions," says Mr.. Richardson
an area on which the SECS
study has been concentrating.
But how are the inspections to
be made?
Say the mutual funds: they
must be made by the agencies
which now supervise the indus
try-the SEC. State and local
governments, the National As
ISOLATION Of Securities Dealers,
the stock exchanges. As one
leading sponsor of mutual funds
declared, Il don't think you can
Just say to the mutual fund
industry regulate yourself We
are already regulated by the
SEC under the 1888 and 1870
acts"
says the SEC: adequate reg
ulation by the SEC would be
impossible. In Mr.. Cary's words,
With the SECS limited staff,
with our limited personnel, we
would get around to inspecting
each fund only once every IL
years. This is absurd" adds
Llwellyn p. Young. the SECS
regional administrator in New
York, I'VE strongly encourage
self regulation by the mutual
fund industry II for no other
reason that the alternatives TO
II are horrific.
Paradox Emphasized
Thus, today. adequate self
regulation is In the study,
stand-off" stage and the para
dox is. as Mr.. Cary emphasizes,
that In this case, the SEC Is
In favor OF less governmental
intrusion while the industry
prefers more"
Four months from now, the
SEC will submit 10 Congress It's
findings and recommendations
on the mutual fund industry.
Within these four months. the
mutual funds have two clear
alternatives:
They can take the initiative,
recognize that there are prob
lens and abuses, at least some
questionable methods Of oper-.
alton and act aggressively 70
mute the criticism by eliminate
ing the abuses and Questionable
methods Of operation.
Or they can squabble about
responsibility. be acutely SEN
sitive even TO criticism which
they themselves admit IL justi-
fled. take q "let George do Il"
attitude and thereby make Q
call for new regulatory leeisla-
flor, tgttsftta ilx rnttola