Today, Senator Peter Fitzgerald (D-Illinois), Senator Daniel Akaka (D-Hawaii) and Senator Joe Lieberman (D-Connecticut) introduced a bill that would push for major changes in the mutual fund industry.

Some of the provisions include:

Mandating that most of a mutual fund’s board be neutral by requiring three-quarters of directors and the chairman of a fund's board to be independent. And, directors would have to be reapproved by shareholders every five years.

Full disclosure of salaries for portfolio managers plus brokerage commissions.

Disclosure of fees for brokerage commissions when calculating a fund’s expense ratio.

Requiring brokers brokers who sell funds to inform customers in writing of their commissions on any trade

Requiring the SEC to study whether investors would benefit from creating an oversight board to inspect and discipline mutual-fund directors. The SEC would also be mandated to require the SEC to study financial literacy and the General Accounting Office to survey mutual-fund advertising practices.

However, with only three weeks left to Congress’ session before the holiday break, it’s highly unlikely that this bill will be passed. When Congress reconvenes in January, its will have to be reintroduced along with all the other bills that are likely to come. The Senate Banking Committee, which oversees the fund industry, has planed a hearing next week with SEC Chairman William Donaldson, New York Attorney General Eliot Spitzer and other regulators.

In the meantime, Senator Richard Baker (R-Baton Rouge), chairman of the capital markets subcommittee of the house financial services committee, has already introduced a Senate bill with similar provisions such as open fee disclosure, portfolio transaction fees, disclosure on manager compensation and holdings, breakpoints and revenue-sharing agreements. 

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