Thank you, Mr. Chairman. I appreciate your conducting this hearing today. I also would like to thank Representative Baker for his leadership on the important issue of mutual fund governance.

Trust is the cornerstone of effectively functioning markets. The abuses involving mutual funds that have been raised include having different sets of rules for large and small investors, ethical misconduct, and individuals enriching themselves illegally at the expense of fund shareholders. I look forward to the examination of these abuses by this Subcommittee.

These revelations are particularly troubling because 95 million individuals have placed a significant portion of their future financial security into mutual funds. Mutual funds provide working middle-class Americans with an investment vehicle that offers diversification and professional money management. Mutual funds are an investment vehicle that the average investors rely on for retirement, savings for children's college education, or other financial goals and dreams. Today's hearing provides us with the opportunity to better understand the troubling issues involving mutual funds, such as market-timing and late trading, which have demonstrated a betrayal of the trust of investors by certain investment companies.

I will be introducing legislation designed to restore public trust in mutual funds. I look forward to working with my colleagues, Chairman Fitzgerald and Representative Baker, to address the issues of mutual fund corporate governance. The transgressions that have been brought to light make it clear that the boards of mutual fund companies are not providing sufficient oversight. To be more effective, the boards must be strengthened and made to be more independent. Investment company boards should be required to have an independent chairman and independent directors must have a dominant presence on the board.

In addition, shelf-space payments and revenue-sharing agreements between mutual fund companies and brokers present conflicts of interest that must be addressed. Brokers must be required to disclose in writing, to those who purchase mutual company shares, the amount of compensation the broker will receive due to the transaction, instead of simply providing a prospectus. In order to increase the transparency of the actual costs of the fund, brokerage commissions must be counted as an expense in filings with the SEC and included in the calculation of the expense ratio, so that investors can have a more realistic view of the expenses of their fund. My legislation will address the need for increased transparency of these financial relationships and transactions in order to ensure that individual investors are able to make fully informed decisions when purchasing mutual fund shares.

I thank our witnesses for being with us today. I look forward to working with all of you to restore the shattered trust of investors and bring about significant reform of the mutual fund industry. Thank you, Mr. Chairman.