I Was Investigated by the SEC

The Securities and Exchange Commission wasn't so sleepy during the fund scandal after all.

I, for one, can tell you that the SEC -- under intense scrutiny for "missing" the current mutual fund scandal -- was very busy during the past few years. I know this because in early 2001, the SEC was busy investigating me. The crime? Exposing the costs of market-timing on my fund research Web site and offering a solution.

Market watchers are currently asking: Where were our mutual fund regulators during all this insider dirty-dealing and skimming from fund shareholders? Worse, rumors abound that people tried to tip off the SEC to the abuse of fiduciary duty by fund executives, and the SEC yawned.

These rumors of inaction by federal securities regulators in the face of tips are wrong. How do I know? Because somebody tipped off the SEC in early 2001 about a supposed mutual fund scheme I was up to. Never mind the tips on shareholder bilking by fund companies, the SEC reacted quickly and decisively to investigate me when I was exposing the bilking.

Here's what I was doing: I was compiling lists of stocks, tracking the performance and analyzing the portfolios on my Web site. And here's what the tipsters told the SEC I was doing: operating an illegal, unregistered investment pool that was essentially a mutual fund, only dodging the regulations that put mutual fund shareholders in safe hands.

Weeks after receiving the tip that I might be doing something untoward, the SEC decided to fly 10 agents from Washington to Los Angeles, where I resided at the time and ran my supposed mutual fund corruption ring. The SEC needed to act fast -- I had just moved to L.A. from Michigan, and the sure sign of a boiler room is a fly-by-night relocation. Regulators needed to pounce before I up and moved again.

When the day of reckoning came, the regulators pared down the number of agents they flew in from Washington to just a handful, but they had the rest of the posse on speaker-phone.