Client Alert

California Attorney General Uses New Watchdog Powers In the Mutual Fund Arena

February 02, 2004

Grace A. Carter and Joshua C. Irwin

In the latest development in state and federal enforcement of the securities laws, California Attorney General Bill Lockyer has acted quickly to exercise new watchdog powers just conferred by the California Senate Bill he sponsored. Attorney General Lockyer began the new year by launching a probe into whether three California-based mutual funds defrauded investors by failing to disclose deals under which broker-dealers received compensation in exchange for  recommending particular mutual funds to customers. The new law gives the Attorney General concurrent jurisdiction with the Commissioner of Corporations to enforce California’s securities and commodities laws. The focus of the current investigation is whether investors were improperly steered toward certain mutual funds by brokers who were receiving payments from those funds.

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