Paul Schott Stevens, president of fund trade organization the Investment Company Institute (ICI), called for more hedge fund regulation in a speech to the National Press Club in Washington, D.C. on Tuesday.

Stevens pointed out the role of hedge funds in the mutual fund scandals. Although Stevens' call for more hedge fund regulation was saved for the end of his speech (according to prepared remarks), his statement was strong: "[i]f the disparities in our scheme of regulation become too stark - with mutual funds regulated so comprehensively and competing investment vehicles not at all - it will simply invite sharp operators to go where they can escape scrutiny and maximize profits."

Hedge funds were not the only ones garnering blame -- intermediaries and mutual funds' own fiduciary lapse were also responsible for the scandals.

Stevens spent half of his speech summing up mutual fund history, and making the case for why mutual funds are still a good investment and appealing to many investors, according to prepared remarks.

Although Stevens acknowledged that the scandals ran "broad and deep" in the industry, he also asserted that "no financial institution has served more clients longer with fewer lapses than have mutual funds."

Stevens warned against solutions requiring more disclosure, stating "requiring the disclosure of more information to investors does not assure greater understanding or insight." Stevens cited Alan Greenspan as saying "'in our laudable efforts to improve public disclosure, we too often appear to be mistaking more extensive disclosure for greater transparency.'"

He later continued: "[m]eaningfully informing investors - not simply making disclosures - must be our common and constant objective."

The solution lies, Stevens said, in "[r]ededicating ourselves to first principles, and bolstering the fiduciary culture upon which the industry was founded." 

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