SEC Chairman Tells Fund Directors to Shape Up

Securities and Exchange Commission Chairman William Donaldson had a few words for mutual fund directors Wednesday night: Shape up.

Donaldson addressed the Mutual Fund Directors Forum, a nonprofit membership organization for investment company independent directors. After mentioning the raft of trouble roiling the fund industry -- including late trading, abusive market-timing, selective disclosure of portfolio holdings, undisclosed payments for "shelf space" to gain placement on brokers' preferred lists and, "worst of all, fund insiders facilitating or participating in this abusive activity" -- he reminded the directors of their role in this mess.

"While I will touch on our enforcement and regulatory responses to these problems," Donaldson said, "I want to emphasize the critical role that you ... play in the solution to the ills that currently befall the mutual fund industry." ...