Government may set mutual fund fees

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New York Attorney General Eliot Spitzer is moving to regulate fees Mutual Fund operators charge the public. His premise is that institutional funds making large purchases pay a smaller percentage than small investors, and that is unfair.

Spitzer, fresh from taking on fund operators over improper and illegal practices, is heading off in a very dangerous direction. Those guilty of malfeasance and fraud should be prosecuted, but pricing is a matter for the free market, not for the government to determine.

Consumers should be left to exercise diligence in shopping for the best deal. Astute investors consider a fund’s performance history, integrity of the operators, and total costs before they invest. Some funds charge a high fee, but investors are free to say no.

Last year, mutual funds received $72 billion in total fees.

Spitzer is challenging the discount structure, saying large discounts offered to large institutional investors are too low, while small investors pay too much. That may be true in some cases, but again it’s an investor’s choice, not the government’s.

If government sets fees charged by mutual fund operators, then government can set the price of any service or product, including yours. We must allow the free marketplace to determine fair and reasonable pricing.

There are abuses in the system, but let’s not open the door to government interference in free market pricing. That’s a job for the market.

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Steve Marr is the former CEO of the fourth largest import-export firm in the U.S., a company which facilitated international trade for many of the largest companies in America. Currently, Steve consults with with businesses and ministries utilizing ancient Biblical principles for success in today’s marketplace. Click here to contact Steve, or visit his website at www.businessproverbs.com.