Mutual fund briefs

WASHINGTON — The SEC may again fail to detect trading abuses by mutual fund companies unless it develops a plan to routinely receive and review annual compliance reports from chief compliance officers at mutual fund companies, according to a GAO report released April 22.

Mutual fund compliance staff had detected evidence of market timing and other arrangements with favored clients long before the SEC became aware of the trading abuses, but they lacked independence from their companies to correct the problems, the Government Accountability Office noted. And although a new SEC rule requires all mutual fund companies to have chief compliance officers who report directly to the mutual fund board of directors, organizational conflicts of interest may still exist if they work for the investment advisers, rather than the mutual fund companies, the report noted.

ST. PAUL, Minn. — The Minnesota State Retirement System has some "weaknesses" in its administration of the state's $2.8 billion deferred compensation plan, according to a special review by the state legislative auditor's office.

While the auditor "did not find evidence of financial wrongdoing" by retirement system employees, retirement system officials didn't have "adequate controls" over the plan's $11.5 million administrative account, which includes plan fees, according to the report, issued April 20.

The retirement system took over education services and enrollment in 2004 through a new in-house call center, and most of the weak points cited in the report stem from that transition period, said David Bergstrom, executive director of the state's $10 billion retirement system. The plan has saved about $1 million by moving the services in-house, he said. Great-West Retirement Services, the deferred compensation plan record keeper, previously managed education and enrollment as well.

Mr. Bergstrom said plan officials are implementing the auditor's recommendations and most are already in place.

WASHINGTON — Defined contribution assets rose to $4.3 trillion in 2004, a 10% increase from 2003, according to the Annual Marketplace Update Report by the Society of Professional Administrators and Recordkeepers. Assets in 401(k) plans reached a record $1.975 trillion in 2004, a 10% increase from 2003.

More than 409,000 401(k) plans covered more than 50 million U.S. workers in 2004, compared with 395,000 plans and 45 million participants in 2003. Participants in 401(k) plans had nearly 70% of their account balances in stock as of Dec. 31, an increase of five percentage points over the previous year.

The report estimates almost 12,500 new 401(k) plans will be formed this year, primarily among smaller companies.

TOLEDO, Ohio — The Harbor Small Cap Value Fund will be closed to most new investors on June 30, confirmed John Hoff, spokesman with Harbor Capital Advisors. TEARNEST Partnerssed by EARNEST Partners, had $1.07 billion in net assets as of March 31. The fund will continue to sell shares to existing shareholders, shareholders who invest through pension or benefit programs and investors who meet "certain other criteria," according to a news release.

WASHINGTON — Socially responsible investing funds support "traditional" corporate governance proxy resolutions such as expensing stock options and separating CEO and board chair positions more often than "conventional" funds do, according to a study from Social Investment Forum Foundation.

Data from July 1, 2003, through June 30, 2004, the first 12-month period after the SEC required mutual funds to disclose their proxy votes, indicated that socially responsible funds supported twice as many shareholder-proposed corporate governance resolutions and "vote no" campaigns as supported by conventional funds.

Socially responsible funds voted to support four "plain vanilla" corporate governance issues — poison pills, expensing stock options, golden parachutes and declassifying the board — 90% of the time, compared with 72% of the time for conventional funds, said Tracey Rembert, who wrote the study.

MINNEAPOLIS — Wells Fargo introduced Advantage Funds, a mutual fund family created through the merger of Wells Fargo and Strong, confirmed Susan Stanley, spokeswoman.

The combined family, managed by Wells Fargo Funds Management, is made up of 120 funds and has more than $100 billion in assets. Wells Fargo's acquisition of $29 billion in assets from Strong Financial Corp., including $24 billion in mutual fund assets, was completed Dec. 31.