At their core, most financial scandals have been about someone failing to follow the rules. And whether it's insider trading, improper perks or mutual fund managers putting their own interest ahead of the shareholder, the public outrage typically has more to do with the rules being broken than it does the dollar amounts involved.
But some consumers and investors are outraged by behavior they see that is perfectly legal - witness frustration over bank holding periods on a cashed check - or over any price they consider out of line.
To that end, several investors and consumers mailed me questions or complaints alleging a problem with a financial institution but showing a weakness in consumer awareness of the rules.
Iris E. in Jacksonville, Fla., wanted to know if she should be "outraged by an expense fee on a money market account." She sent along a copy of the current period fees and expenses disclosure on a Columbia Cash Reserves account, noting that the annual expense ratio of 0.8 percent had cost her $31 last year, and contributed to the account being the "poorest performing cash investment."
If the fee was actually on a money market bank deposit account, Iris E. would have reason for outrage. But she doesn't have a bank deposit; her money is invested in a money market mutual fund.
The 0.8 percent expense ratio is pricey, and her return would be better if she went for a lower-cost offering, but mutual funds have expense ratios stated as a percentage of assets under management.
The real reason she should be outraged is that someone at her bank sold her the money fund without making it clear what she was getting and how it works. If she didn't know that she was buying a mutual fund, chances are she doesn't recognize that her money in the fund is not protected by the Federal Deposit Insurance Corp.
And while it's tempting to absolve her of responsibility, the truth is she should be a bit frustrated with herself.
Clearly, when performance was disappointing, she looked through the prospectus and found the table showing the fees; she should have looked for that information up front, which would have allowed her to ask questions and recognize that this fund was not what she was hoping for.
Joseph G. in Boynton Beach, Fla., found a different problem expressly because he looked at the fine print concerning his investment in a closed-end fund run by Van Kampen Investments. Specifically, he went looking at the directors of the fund and saw that they bring down a big chunk of money for overseeing 73 different Van Kampen offerings.
"How can a trustee oversee 73 funds and do a good job?" he asked. "And the compensation seems enormous for the time spent on the job and the number of meetings attended." He also questioned how the board could be doing its job with expenses north of 1 percent.
His questions not only are good ones, but they should be the basis for some level of mutual fund reforms, because it has been clear to me for years that directors who oversee too many funds don't seem to do a particularly good job at any of them. Their service is fine, in most cases, but never exceptional.
But until the rules are changed, fund firms will have boards serving huge numbers of funds, meaning that directors give short shrift to a lot of issues - including expenses - and rubber-stamp many votes. It's a bad deal for consumers, but until the rules change, there's nothing consumers can do but worry and complain.
jaffe@marketwatch.com
Charles Jaffe is senior columnist for MarketWatch. He can be reached by mail at Box 70, Cohasset, MA 02025-0070.