The fallout of these large-scale collapses and extensive media coverage has been a mixture of true corrective measure and a little old fashioned grandstanding. The Sarbanes Oxley Act is the primary regulatory result of the situation. A good portion of the act is well considered and will benefit the economy and society. However portions of the act have been criticized as merely an obligatory Congressional knee-jerk reaction to such a high profile situation in order to appease the voting public.
With Sarbanes Oxley passed, members of Congress are now questioning the health and integrity of the mutual fund industry. Some commentators have seen this focus as merely Congress seizing an opportunity to pander to the public's peaking interest. Any industry opposition will have the initial feel of protectionist, and not sit well with the general investing public. However the size, nature, and breadth of the mutual fund industry, provide a compelling argument for the investigation in this arena. .
2. Size and Nature of the Industry.
The basic premise that has made mutual funds so successful is that a small investor can gain the espoused benefits of portfolio diversification through pooling investments with others in the same situation. The level of diversification becomes much more cost efficient when spread over large numbers of smaller investors. In addition, these individuals are able to receive professional investment management to which they would not have access, if not for the mutual fund. In addition, most brokerages and many mutual funds offer customers check writing ability, which is so closely linked to their fund holdings, that many individuals are shifting money once kept in banks to investment/mutual fund accounts. .
Most of America owns a mutual fund, and mutual funds own a good chunk of America. The shareholders own the mutual fund, which is operated by a Manager through a Board of Directors.
