Lieberman to Propose Increased Oversight for Mutual Funds

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Lieberman to Propose Increased Oversight for Mutual Funds

The New York Times

October 28, 2003

Senator Joseph I. Lieberman, the Connecticut Democrat who is seeking his party's presidential nomination, will introduce a set of proposals today to increase regulatory oversight of mutual funds and reduce conflicts of interest among mutual fund boards, a campaign official said yesterday.

Mr. Lieberman's announcement, which is expected at a campaign stop in New Hampshire, appears to be the first response from a presidential candidate to the rapidly expanding mutual fund scandal. It indicates that the industry and its oversight by the Securities and Exchange Commission will come under heightened scrutiny as the campaign heats up.

"The mutual fund mess is just the latest example of an S.E.C. that's been M.I.A. while middle-class investors and their retirement savings got shredded," said Dan Gerstein, deputy communications director for the Lieberman campaign. "Joe Lieberman wants an S.E.C. that is going to live up to its responsibilities before the scandals start - to restore fairness and integrity to the markets and protect the interests of the average investor."

Mr. Lieberman is expected to call for the creation of a special office of investor protection at the S.E.C. to serve as an ombudsman for small investors. He will propose setting up a joint task force consisting of commission officials and state regulators to ensure that local officials on the securities beats work closely with federal regulators and are not shut out of the process.

In addition, Mr. Lieberman will move to create more checks and balances within fund companies, campaign officials said. One would require compliance officials at fund companies to report directly to the board, rather than to executives. Another proposes limiting the numbers of fund portfolios that directors oversee. Directors at large fund companies are often charged with oversight of 100 portfolios or more, leading critics to question the level of scrutiny they bring to each portfolio.