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Bill Donaldson spent his last day as chair of the SEC slapping George Bush across his face, by passing a new rule designed to reduce mutual fund fraud.
Within the mutual fund industry, an estimated eight-trillion dollar industry, there has been widespread scandal and fraud coming to light over the past few years. Fund investors, private individuals, are frequently defrauded of their money.
This new rule calls for mutual funds to have an independent director and calls for seventy-five percent of a board of directors to be independent. Most fund scandals have been linked to fund insiders, especially directors.
Today, Donaldson voted with two Democrats to pass this new rule, by a narrow margin of three votes to two votes. Cynthia Glassman and Paul Atkins, both Republicans, voted against this new rule. Previously passed, this rule was overturned by our U.S. Court of Appeals which cited issues about procedural costs and possible procedural flaws.
Passing a new rule to collar mutual fund fraud, such as frontloading and kickbacks, has been fought hard against by Republicans and corporate special interests. This new rule is sure to be again challenged in court.
Cynthia Glassman, so steamed up about this, apologized to the Appeals court, "a rush to judgment...an assembly of false statements, unsupported assumptions, flawed analysis and misinterpretations."
Paul Atkins also shared harsh words, "It violates the spirit, if not the letter, of the court's opinion."
Donaldson, Harvey Goldschmid and Roel Campos refrained from acrimonious comment after voting to pass the new rule to clamp down on mutual fund fraud. Donaldson briefly commented, "Our failure to act would, I fear, throw the future of this rulemaking into an uncertain limbo until a new chairman is confirmed."
Most agree George Bush forced Donaldson out of office to install a corporate friendly chairman, Christopher Cox, who has a questionable history. This reporter supports Donaldson, in his last day of office, supports him giving Bush a justified political slap.
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