“Even as a wave of investigations, indictments and record fines have washed over Wall Street, the mutual-fund industry’s largely scandal-free record has allowed it to avoid being singled out for stepped-up scrutiny by regulators and legislators,” writes Aaron Lucchetti in today’s Wall Street Journal.

“That could be about to change.”

“Reports requested by Congress on the mutual-funds business are being completed by the Securities and Exchange Commission and the General Accounting Office and are about to be sent to Capitol Hill. The reports likely will lay out an agenda for increased oversight of the industry, including possible new mandates by Congress and rules changes by the SEC in areas such as fund sales practices and fee disclosures.”

“The added scrutiny comes at a time when many of the nation’s 95 million fund investors, while not abandoning their fund accounts, have been roiled by their fund companies’ dealings after three years of losses in their stock funds.”

“SEC officials have made it clear that while mutual funds haven’t been dragged into the Wall Street corruption investigations, the industry remains responsible if its practices are found to treat investors unfairly.”

” ‘Funds and their boards cannot simply say, “We are not at fault, therefore, it is not our problem,” ‘ Paul Roye, the SEC’s top mutual-fund regulator told fund executives at an industry conference in May. ‘When any issue impacts fund investors, it is our problem.’ “

“The fund industry says it agrees with that message and that it has a long track record of backing measures to protect investors. ‘The fact that we don’t think we did anything wrong doesn’t mean that we’re not terribly concerned about shareholders,’ says Paul G. Haaga Jr., chairman of the Investment Company Institute, the industry’s largest trade group.”

“Congress started to turn up the heat on mutual funds in late March when a House subcommittee led by Richard H. Baker (R., La.), saying he was ‘troubled’ by the industry’s disclosures to investors about fees and expenses as well as the performance of fund directors and other matters, asked the SEC to answer 18 questions about mutual-fund practices. The SEC is expected to deliver a lengthy response to Congress next week.”

“The GAO, the congressional watchdog agency, also is due soon to release a report updating previous studies on the level of mutual-fund charges.”