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Thank you Chairman Shelby for the third in a series of oversight hearings on the mutual fund industry. It has been nearly three months since our last hearings on this issue were held and since that time many significant events have taken place.

Back in November, I stated that virtually every day since the revelation of market timing and late trading abuses, the mutual fund industry appeared on the front pages of newspapers and was featured in television news segments and radio interviews. That situation does not appear to have changed. Just over a week ago, news surfaced of a mutual fund's employees permitting market timing of a mutual fund set up for young investors.

Unfortunately, the bad actors in the mutual fund industry, who put their own interests ahead of their shareholders' and in the case I just cited ahead of children, have put a cloud over the entire industry. I have no doubt that the individuals in charge of preventing abuses to the system will be brought to justice. Their actions clearly violated the current regulatory scheme, and the SEC and state regulators already have commenced enforcement actions to rid the industry of them.

It also is clear that the SEC has been extremely busy since our last set of hearings. The Commission has been putting together a series of rule proposals to clarify existing law and to ensure that the grey areas of a mutual funds' activities are clearly marked as black and white. Some of the proposals, including one on mutual fund compliance programs, have already been adopted. While I support many of the SEC's actions in this area, it is clear that there are many important areas that need to be fully and carefully examined before final action takes place.

For example, the SEC proposed a "hard 4 o'clock" close for orders of mutual fund shares to reach the mutual funds. As I am a member of the Committee on Health, Education, Labor and Pensions, I have heard from many pension and benefit plan administrators, especially from the mountain and western states that a hard 4 o'clock close would place employees with pensions and 401(k) plans at a disadvantage with investors who place orders for mutual fund shares directly with mutual funds.

Also, there are issues that appear ripe for a quick regulatory or legislative fix. However, upon closer examination, these issues are far more complex and intricate than they first appear. For example, certain industry members would institute a complete ban on so-called "soft dollars" which may be a misnomer in itself. Unfortunately, other industry members state that a complete ban would place independent research firms at a competitive disadvantage. These are the same research firms that were described as essential for investor confidence in last year's $1.4 billion SEC and state global settlement with Wall Street firms. We need to fully understand why these independent research firms would be placed at a disadvantage and what can be done so that they are not disproportionately affected by any proposed changes to the way the industry operates.

Before us today, we have a diverse panel of mutual fund experts that will help us to understand better the operations and corporate governance policies of mutual funds from the perspective of investors. Their testimony is essential for us to have a clearer comprehension of the intricacies of the operations of the mutual fund industry, an industry structured unlike any other financial or corporate industry. We need their expertise to help us discern the true effects of proposed reforms that have been raised to date.

For example, I have serious questions about the recent SEC proposal to require an independent chairman for a mutual fund even if the mutual fund's board is comprised of a super-majority of independent directors. Another proposal that the Commission is considering this morning would require a mandatory redemption fee for investors that trade within a short period of time. I am unclear as to whether this proposal will completely stop market timing abuses and I am concerned that the proposal may significant unintended consequences for some individual investors. The witnesses' testimony is crucial for our understanding of issues like these.

If legislation is necessary, I would like to see Congress thoroughly evaluate the problem to find the right solution. We should not rush to pass legislation as we may do undue harm to the industry. I applaud the Chairman for taking a similar approach that we used in the Sarbanes-Oxley Act.

Typically, for every action, Congress has a tendency to overreact. In this situation, we need to thoroughly review the problems to find the appropriate solution. In addition, we still have a responsibility to make sure that whatever action is taken does not have a negative cascading effect on small entities and small investors.

Several of our witnesses in their written testimony have cited a greater need for investor education and financial literacy. I wish to note that the Financial Literacy and Education Commission created by the Fair and Accurate Credit Transaction Act (FACT) of 2003, held it first meeting last month to coordinate the federal government's financial literacy and education efforts. Financial literacy has been a very important issue for Senator Sarbanes, our colleagues on the Committee and I. I appreciate your efforts to have it included in the FACT Act.

Thank you Mr. Chairman for holding this hearing. I appreciate the effort that you are taking to carefully analyze the problems with the mutual fund industry. I look forward to working with you on future Committee hearings highlighting this very important matter.