BW Online | September 19, 2003 | The Mutual-Fund Scandal and You

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SEPTEMBER 19, 2003 READER SURVEY

The Mutual-Fund Scandal and You

With several fund companies' trading practices under scrutiny these days, has your attitude toward this investing standard changed?

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The mutual-fund industry, which had remained free of financial scandal, now finds itself squarely in the sights of New York Attorney General Eliot Spitzer, who's investigating a number of fund companies for practices that may be unethical or illegal. How, if at all, has this affected your attitude toward mutual funds and the way they do business? That's the focus of this BusinessWeek Online Reader Survey, which as always is unscientific, since anyone who wishes to can participate.

Do you own mutual funds?

	Yes
	No
	Don't Know

How familiar are you with New York Attorney General Eliot Spitzer's investigation into mutual fund trading practices?

	Very familiar
	Somewhat familiar
	Not familiar at all
	Not sure

Based on what you know about that investigation, would you say that your opinion of mutual funds as an investment vehicle is now:

	Unchanged
	Much more favorable
	Much less favorable
	Not sure

Based on what you know about Spitzer's investigation, do you think questionable practices at mutual-fund companies are:

	Very prevalent
	Somewhat prevalent
	Not at all prevalent
	Not sure

How much money do you have invested in mutual funds?

	Less than $10,000
	$10,001 to $50,000
	$50,001 to $100,000
	More than $100,000
	None
	Not sure

If your fund company is named in the investigation, how likely would you be to consider selling your shares in that company's funds?

	Very likely
	Somewhat likely
	Neither more nor less likely
	Somewhat unlikely
	Not likely at all
	Don't know

Would you say that the current degree of regulatory oversight of mutual funds is:

	Very adequate
	Somewhat adequate
	Neither more nor less adequate than for other investments
	Somewhat inadequate
	Totally inadequate
	Not sure

Hedge funds may have worked out deals with fund companies allowing them to engage in the types of trading Spitzer has challenged. How familiar are you with hedge funds and how they operate?

	Very familiar
	Somewhat familiar
	Not familiar at all
	Not sure

Based on what you know about hedge funds, would you say the current degree of regulatory oversight of them is:

	Very adequate
	Somewhat adequate
	Neither more nor less adequate than for other investments
	Somewhat inadequate
	Totally inadequate
	Not sure

According to Eric Zitzewitz, an assistant professor of economics at Stanford University, an investor with $10,000 in an international fund would have lost an average of $115 in 2001 as a result of the some of the practices Spitzer has uncovered. How significant do you consider such a loss to be?

	Very significant
	Somewhat significant
	Not significant at all
	Not sure

If mutual-fund companies reaped millions or tens of millions in extra income because of the trading practices Spitzer is investigating, how significant would you consider that to be?

	Very significant
	Somewhat significant
	Not significant at all
	Not sure

Of the following remedies for the practices Spitzer is investigating, which would you most favor? (Choose as many as you think would be appropriate):

	No changes are needed
	Replace boards at funds that have engaged in questionable practices
	Require funds to disclose more information about their expenses -- including one of their biggest, the cost of trading
	Require funds to reduce or eliminate certain extra fees -- such as "marketing charges" -- that they levy on shareholders
	Reform sales practices, such as one where funds pay brokerage houses extra to push their products
	Require funds to reveal the performance incentives created by the compensation plans of fund managers
	Other

What types of penalties should regulators levy on fund companies that are found to have engaged in illegal trading practices?

	Fine such companies
	Suspend or revoke the registered investment company status of such companies
	Force fund companies to fire key executives involved in questionable trading schemes
	Fund executives convicted of illegal practices should be sent to jail
	Not sure

If you would like to be notified by e-mail of the results of this poll, please enter your e-mail address:

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