More companies are likely to be charged in the burgeoning scandal surrounding the U.S. mutual fund industry, the head of the Securities and Exchange Commission’s enforcement division told Congress Tuesday.

Stephen Cutler, testifying about the investigations into the US$7 trillion mutual fund business, said the SEC plans to send notification to some firms this week that it intends to file charges.

Cutler spoke as the scandal struck Prudential Securities. The SEC and Massachusetts securities regulators filed civil charges alleging improper trading by former brokers and branch managers at the company’s Boston office.

The regulators alleged the brokers hid rapid in-and-out trading in mutual funds to enrich themselves and the hedge funds whose money they were investing.

The move followed the announcement Monday that Lawrence Lasser, chief executive of Putnam Investments, was stepping down following civil fraud charges against the mutual fund giant.

Cutler told a House of Representatives subcommittee on capital markets that more than 100 other companies are being scrutinized..

The scandal has tarnished the reputation of mutual funds, traditionally viewed as safe, conservative investments.

The SEC says fundamental changes are needed in the way the mutual fund industry operates and governs itself.

The commission has found that one-quarter of the largest brokerage houses helped favoured clients to illegally trade mutual funds after hours.

The North American Securities Administrators Association is praising the efforts of state and federal regulators for investigating the trading practices of the U.S. mutual fund industry, and it is urging Congress to strengthen legislation to protect mutual fund shareholders.

“These shareholders have entrusted their retirement, college and other long-term savings to mutual funds. They deserve to be treated equally and honestly,” said Ralph Lambiase, president of the North American Securities Administrators Association, in a news release.

Lambiase said that state securities regulators are actively pursuing additional inquiries into mutual fund improprieties and are committed to aggressively addressing mutual fund complaints raised by investors.

“Enforcement actions resulting from these inquiries, combined with those of our federal counterparts, are necessary steps in our shared effort to restore investor faith and confidence,” he insisted.