Some mutual fund companies are looking to pass the buck to broker-dealers over potential liabilities stemming from market timing and late trading of funds, brokerage executives say.
Over the past two months, many mutual fund companies have been sending additions and revisions to selling agreements to broker-dealers that sell their funds.
In the revised agreements, the fund companies often ask brokerage executives to sign off to ensure that no adviser or broker is engaging in late trading, which is illegal, or market timing, which is loosely defined and supposedly discouraged by the industry.
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The mutual fund companies are looking to put a potential legal burden on the broker-dealer networks that sell their funds, says another brokerage industry executive, also asking not to be named. "They want to limit their liability, and place it on the shoulders of the broker-dealer," the executive says.
Shifting responsibility to the salesman does nothing to stop the thievery carried out by insiders in senior management.
The solution to the mutual fund crisis is the same as the solution to the Enron crisis: put those responsible in jail, with sentences that are proportionate to their crimes. Make the convictions substantial and humiliating.
More than half of federal prisoners are imprisoned for drug offenses. But white collar CEO crime, which arguably is much likelier that drug possession to victimize innocent people — by stealing their money, health or livelihoods — is punished with the gentlest of reprimands.
Blaming anyone else is all the rage right now. Bush's top contributor Ken Lay is still at large because the Department of Justice blamed the auditor instead of the perpetrator.
Note that all this deflected responsibility comes from the people who promised to bring accountability back to America. Ultimately, your view of this issue depends on your relative definition of what corruption is. Would you rather your president lie about accepting $2 million from Enron, or a blow job?
