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Wednesday September 08, 03:14

Unit funds row continues

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(by Ameli Berksman)

U.S. unit funds, possessing up to 95% of total assets, were charged for violation of regulations a year ago. The situation hardly changed this year.

The major violations lied in the field of the short-term deals and officially banned late trade. Unit funds 11 management companies agreed to pay as much as $2.5 billion to settle down the investigation held by New York State Attorney General Eliot Spitzer, Securities and Exchange Commission and other regulators during the previous year.

As a result, majority of management companies have lost the lion’s share of their clients’ money with the main executives being dismissed.

Spitzer stipulated to decrease brokerage down to 5-year term. That made most of the companies to cut costs. Brokerage was reduced in 1,858 of the total 18,000 of the companies in 2004, Lipper says.

SEC also has set several regulations. It stipulated to control bin rates in December and bring up to 75% of independent members into their board making such Director Generals as Edward Johnson of Fidelity Investments and John Brennan of Vanguard Group leave. Earlier the percentage point of independent members didn’t exceed 40%.

Management companies are strongly against the regulations. U.S. Chamber of Commerce declared SEC had gone beyond its commission having no right to set regulations.

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