Hedge Lobby Snaps Back at Mutual Fund Group

John Collins, an ICI spokesman, said Thursday that his group would not respond to Gaine's barb, except to say that ICI's Stevens supports regulation and supervision of "mutual funds, selling intermediaries and hedge funds alike."

"He's not defending bad behavior on the part of mutual fund personnel," Collins said of the findings by New York State Attorney General Eliot Spitzer and other regulators that many fund companies were complicit in trading misconduct. "I think Mr. Spitzer's information indicated ... that the mutual fund scandal involved trading abuses by an organization called Canary Capital Partners, and as I recall, that falls into category of hedge fund."

The SEC has issued a host of new rules for mutual funds since the market-timing scandal was revealed, and Stevens said the ICI supported those reforms, as well as proposed regulation of hedge funds.

"We all recognize that -- first and foremost -- this is a mutual fund scandal," he said. "But the scandal is not limited to mutual funds. Enforcement actions and regulatory reforms at the SEC are addressing mutual fund issues comprehensively and forcefully, but the record developed since last September makes it clear that more is needed if we are to successfully prevent future abuses."

But Gaine and the MFA have stepped up their efforts to deflect regulatory attention from hedge funds, insisting the industry can regulate its own affairs without outside assistance.

"We support the efforts by Chairman Donaldson and his fellow commissioners to implement long overdue reforms in the mutual fund industry, which are designed to realign the interests of mutual fund companies with their investors."