“The mutual fund industry, plagued by a series of recent scandals, was battered on Monday by new details of widespread trading abuses, the removal of the top executive at a big fund company and the disclosure by federal regulators that the industry faced an imminent wave of government lawsuits,” writes Stephen Labaton in today’s New York Times.

“The scandals also produced their first senior government casualty when Juan M. Marcelino, the head of the New England regional office of the Securities and Exchange Commission for the last 10 years, said he would step down amid criticism that his office failed to investigate promptly a whistle-blower’s accusations in March about problems at Putnam Investments.”

“Putnam, the nation’s fifth-largest fund company, said on Monday that its chief executive, Lawrence J. Lasser, would be leaving in the wake of recent accusations by federal and state prosecutors of civil fraud by the company.”

“As a result of those accusations, six states and New York City have told their public pension funds to stop using Putnam as a fund manager, and others are considering similar moves.”

“On Capitol Hill, where federal and state officials testified on Monday at a Senate hearing on the mutual fund industry, lawmakers have begun to call for significant changes in regulating the industry — which is in its greatest turmoil since it came under federal oversight more than 60 years ago.”

“Mutual funds, which manage money on behalf of their shareholders by buying and selling stocks and bonds, control some $7 trillion in investments for 95 million investors, and the industry’s reputation as a haven for unsophisticated and small investors has taken a beating.”

“Several lawmakers have introduced legislation that would require directors of mutual funds, including board chairmen, to be more independent from the management of the funds. But federal and state officials and other experts said on Monday that the problems were not with the regulations but with lax enforcement of existing rules.”

“Eliot Spitzer, the New York State attorney general, who has moved more aggressively and quickly against the funds than his federal counterparts, attributed the problems to complacent directors — a shortcoming that has also troubled some of the nation’s largest corporations and the New York Stock Exchange. Mr. Spitzer said that in future settlements with funds, he would demand that the penalties for serious infractions include returning fees to investors.”

” ‘We have opened up a window into a morass of problems,’ Mr. Spitzer said at the Senate hearing. ‘This is a window into what has been foggy, murky and impossible to understand.’ “