Prometheus 6

As scandals fade, firms resist reforms to protect investors
Wed Apr 21, 8:55 AM ET

In the spring of 2002, barely months after the Enron scandal had erupted, a reform drive in Washington to curb corporate abuses already had run out of steam. Only after a second major scandal erupted on Enron's heels - the collapse of WorldCom - did Congress and federal regulators overcome fierce lobbying by businesses to enact new shareholder protections.

Now, a drive to reform the mutual fund industry is in danger of a quiet death, as fund improprieties exposed last year recede into memory. Lobbyists have stalled legislation that would require funds to disclose more clearly the fees they charge, so investors can more easily compare costs. Separately, proposed Securities and Exchange Commission (SEC) rules that would make fund directors better watchdogs face uncertain prospects because of industry attacks.

The reforms could protect investors from paying exorbitant fees for paltry returns and losing money from trading improprieties by fund managers. A failure to enact them suggests Washington isn't serious about cracking down on corporate wrongdoing and restoring public trust in the financial system.