But Haaga concedes that he may have gone too far this past May at the annual ICI meeting in Washington when he boasted that the fund industry was “scandal-free.” Since he uttered those words, mutual funds have been under siege by state and federal regulators investigating improper trading techniques known as late trading and market timing; fund companies allegedly allowed hedge funds and others to use these tactics at the expense of small investors. Though the flow of money into mutual funds in the first ten months of 2003 was up 75 percent from the same period last year, according to the ICI, the overall reputational damage is harder to assess. “I suppose the phrase ‘scandal-free’ never should have been used,” Haaga admits. “It wasn’t the proper message -- it’s like saying, ‘Hey, send us your money, and we probably won’t steal it.’” Nevertheless, Haaga, who by day is head of Capital Group’s top-selling American Funds family, calls the ongoing turmoil surrounding the mutual fund industry “a major wake-up call” that will eventually lead to positive changes. “Although difficult, when we get through this, the industry will be better off for it.”
