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Regulation Begins At Home

Laptop Battery With two decisions in the last two weeks, the Bush administration has sent its clearest message yet that it values corporate interests over the interests of average Americans. In the Securities and Exchange Commission's settlement with Putnam Investments, the public comes away short-changed. In the Environmental Protection Agency's decision to forgo enforcement of the Clean Air Act, the public comes away completely empty-handed.

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Thinkpad The 95 million Americans who invest in mutual funds paid more than $70 billion in fees in 2002. These fees went to an industry that did not take seriously its responsibility to safeguard investors' money. Investors are now rightly concerned about whether those mutual funds that breached their fiduciary duties will be required to refund the exorbitant fees they took, and what mechanism will be put in place to ensure that the fees charged in the future are fair.

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Microsoft Unfortunately, the S.E.C.'s deal with Putnam does not provide a satisfactory answer to these questions. Instead, it raises new questions.

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Laptop Computers The commission's first failure is one of oversight. The mutual fund investigation began when an informant approached our office with evidence of illegal trading practices. Tipsters also approached the commission, which is supposed to be the nation's primary securities markets regulator, but the commission simply did not act on the information.

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Laptop Computer The commission's second failure was acting in haste to settle with Putnam even though the investigation is barely 10 weeks old and is yielding new and important information each day. Whether the commission recognizes it or not, the first settlement in a complex investigation always sets the tone for what follows. In this case, the bar is set too low.

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Desktop Computer The Putnam agreement does contain a useful provision mandating that the funds' board of directors be more independent of the management companies that run its day-to-day operations. It also talks of fines and restitution, but leaves for another day the determination of the amount Putnam should pay.

Notebooks Most important, the agreement does not address the manner in which the fees charged to investors are calculated. Nor does it require the fund to inform investors exactly how much they are being charged or even provide a structure that will create market pressure to reduce those fees. Finally, there is no discussion of civil or criminal sanctions for the managers who acted improperly by engaging in or permitting market timing and late trading.

Lenovo S.E.C. officials are now saying that they may be interested in additional reforms. But by settling so quickly, they have lost leverage in obtaining further measures to protect investors. After reviewing this agreement, I can say with certainty that any resolution with my office will require concessions from the industry that go far beyond what the commission obtained from Putnam.

Hard Drive It is not surprising that the commission would sanction a deal that ignores consumers and is unsatisfactory to state regulators. Just look at the Bush administration's decision to abandon pending enforcement actions and investigations of Clear Air Act violations.

Travelstar Even supporters of the Bush administration's environmental policy were stunned when the E.P.A. announced that it was closing pending investigations into more than 100 power plants and factories for violating the Clean Air Act and dropping 13 cases in which it had already made a determination that the law had been violated.

Gateway Regulators may disagree about what our environmental laws should look like. But we should all be able to agree that companies that violated then-existing pollution laws should be punished.

Laptop Parts Those environmental laws were enacted to protect a public that was concerned about its health and safety. By letting companies that violated the Clean Air Act off the hook, the Environmental Protection Agency has effectively issued an industry-wide pardon. This will only embolden polluters to continue practices that harm the environment.

Software My office had worked with the agency to investigate polluters, and will continue to do so when possible. But today a bipartisan coalition of 14 state attorneys general will sue the agency to halt the implementation of weaker standards. In addition, we will continue to press the lawsuits that have been filed. We have also requested the E.P.A. records for the cases that have been dropped, and will file lawsuits if they are warranted by the facts.

Hard Drives Similarly, my office while committed to working with the Securities and Exchange Commission in our investigation of the mutual fund industry will not be party to settlements that fail to protect the interests of investors and let the industry off with little more than a slap on the wrist.

Electronics The public expects and deserves the protection that effective government oversight provides. Until the Bush administration shows it is willing to do the job, however, it appears the public will have to rely on state regulators and lawmakers to protect its interests.

Canon By Eliot Spitzer, attorney general of New York.

Desktop Pc New York Times - 11/17/2003

Topic: Air Pollution

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