Wall Street WARZONE
Mutual Fund Lobby: Warning, Your Fund Owners Have No Fiduciary Duty to You, But Many Conflicts-of-Interest, So “ICI” Spends Millions of Your Profits Helping Fund Owners Get Richer!
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/22/2010

The Investment Company Institute is the mutual fund industry’s lobby. Their members are the owners of the fund management companies, not the investors whose $12 trillion they manage. Unfortunately, fund investors are not well represented by ICI. This organization has no specific fiduciary duties to its Main Street investors. This lack of a fiduciary obligation has been a major issue for investor reformers since the Investment Company Act of 1940, especially for men like Jack Bogle, founder of Vanguard Funds. History has proven over and over that the ICI and its fund company owner/members consistently represent their own personal interest first, and only secondarily the interests of Main Street investors … and they aggressively fight any and all reform efforts.

The ICI operates in virtual secrecy, isolated from the very mutual fund shareholders it purports to represent. A few years ago ICI had about $50 million money in its budget for 5 full-time, 30 part-time, and 75 outside lobbyists. A couple years ago, as part of the K-Street power grab, conservative members of the ICI’s controlling executive committee, all fund company owners were able to engineer a coup that pushed out ICI’s top two executives—both known Democrats—and replaced them with a Washington securities attorney who earlier worked in Republican administrations.

Here’s one major incident involving the new ICI president highlighting how the industry actually operates solely to promote the best interests of fund owners and managers first, ahead of investors. In reality, they believe and act in their own self-interest with absolutely no fiduciary duty to investors. No fiduciary duty? That’s right, America’s mutual funds have total control over $12 trillion that belongs to you and the rest of Main Street America’s 95 million average investors, and yet they have absolutely no fiduciary duty their investors, no specific obligation to put our interest first—none! One of the principal duties owed by anyone handling someone else’s money is missing, an oversight in the original Investment Company Act of 1940 that fund owners and managers refuse to acknowledge or correct. (More)