Compliance can restore confidence in US mutuals, says Fitch Ratings

New York -- Reputation damage incurred by the US mutual fund industry due to late trading and market-timing scandals may affect the firms’ business prospects, according to Fitch Ratings, a New York-based rating agency. Compliance with new regulations will be key to restoring confidence, the agency adds.

In a report released in December 2003, Fitch Ratings says reputation risk and its influence on fund flows has become more of a dominant factor in the asset management industry -- depending on depth and breadth of the charges levelled against an adviser. The report says a firm’s earnings would be negatively impacted by redemptions, regulatory penalties and litigation costs, all of which would likely hit fund company earnings.

Morningstar, a rating agency for mutual funds, has already named firms