Chairman Collins Calls on SEC to Provide Information About its Investigation of Mutual Funds’ Questionable Activities

WASHINGTON, D.C.-Senate Governmental Affairs Committee Chairman Susan Collins (R-ME) today called on the Securities and Exchange Commission (SEC) to explain its recent audit investigations of mutual fund companies. Collins wants to know why the SEC did not act expeditiously on allegations that certain companies, such as Putnam Investments, were engaged in market-timing activities, despite having information about the company’s practices in May 2003.

According to news reports, the SEC audited Putnam Investments earlier this year and failed to find any wrongdoing – even though the SEC now believes securities fraud was being committed at that time.

“News accounts suggest that the SEC’s Boston office ignored a tip on Putnam’s market-timing practices,” said Senator Collins. “I am requesting the details of what the SEC’s Boston office knew and when, as well as information on SEC examinations of other mutual funds, in order to determine whether the agency is conducting the rigorous oversight on which investors should be able to rely.”

In a letter to SEC Chairman William Donaldson, Senator Collins asked for further information about the SEC’s audits of some of the mutual funds that have received the most scrutiny in recent months. She is also seeking copies of any deficiency memos that were provided to those firms.

“The SEC has sole jurisdiction over mutual funds,” Senator Collins pointed out. “I am shocked that it has taken so long for the SEC to root out these unscrupulous practices.”

The Senate Governmental Affairs Subcommittee on Financial Management, the Budget and International Security held a hearing two weeks ago on mutual fund practices and abuses to focus attention on these widespread problems.