This time it's different.

That's what mutual fund industry executives and observers are saying about disclosures that, for the second time in four years, a portfolio manager's personal trading practices are under scrutiny.

Last week Dreyfus Corp. placed Michael L. Schonberg, who managed two aggressive growth funds until April, on administrative leave. The New York subsidiary of Mellon Bank Corp., Pittsburgh, said it suspended Mr. Schonberg amid an internal inquiry into "certain activities involving securities held in two different Dreyfus funds."

The incident echoes a 1994 inquiry that led Invesco Funds to dismiss a star manager. Though the episodes differ in details, the allegations were essentially the same: that a fund manager had placed the opportunity for personal gain above his duty to shareholders.

The mutual fund industry insists its house is in order and that the alleged infractions by Mr. Schonberg are an isolated case. And while there is some anxiety about possible consequences, the industry is stressing how much has changed in four years.

"Virtually everyone in the industry tightened up their regulations fairly dramatically," said Arnold D. Scott, a senior executive vice president at Massachusetts Financial Services, Boston. "But that's not to say that someone can't slip through."

Dreyfus declined requests for interviews, but issued a statement saying its review of Mr. Schonberg's trading practices reflects how the company "places the highest priority on its fiduciary responsibilities."

In the wake of the Invesco incident, fund company executives say, the industry voluntarily intensified its focus on personal trading by raising its ethical standards and increasing oversight.

"I don't think there is a systemic problem," said Robert P. Connolly, general counsel at BlackRock Inc., the investment management subsidiary of PNC Bank Corp., Pittsburgh. "It's like everybody thinks that people get shot on the street everyday in New York."

For instance, the fund companies-under the auspices of the Investment Company Institute, their trade group-agreed to require investment personnel to disclose their trading activities and prohibited trading of personal investments that had been held for under 60 days.

These guidelines, most observers agreed, would have required clear disclosure and steady supervision of the practice Mr. Schonberg is alleged to have engaged in: aggressively purchasing shares of two microcap companies for the funds he managed.

By using the buying power of the mutual funds, Mr. Schonberg may have benefited by driving up the value of shares that he already held in his personal portfolio, according to published accounts of the allegations.

Portfolio managers say the industry guidelines are working. Claude Cody, who runs Aim Management Group Inc.'s $1.8 billion-asset Balanced Fund, said that he could buy stocks he likes, provided he disclosed it-but that he rarely buys.

Instead, Mr. Cody purchases his picks for the fund he manages. And if stocks he likes do not fit his fund's criteria, he can recommend that another Aim fund manager buy them. When he invests, it is almost always in an Aim fund, he said.

Why the conservative stance? "We sell trust-we want people to trust us," Mr. Cody said. Aim monitors its investment managers' personal trading by requiring them to fill out a long questionnaire once a year, he added.

One industry lawyer said encouraging fund managers to limit their ownership of individual securities is the right approach, because managers need to avoid even the appearance of conflicts of interest.

"If you're going to be investing in the type of stocks that you're buying for clients, you should do it through the fund," said Julie Allecta, a partner with Los Angeles-based law firm of Paul, Hastings, Janofsky & Walker.

But, she acknowledged, it can be difficult to sort out issues of fiduciary duty. "There are so many ways in which it's legitimate to do what portfolio managers do. After all, you can't tell them, 'You can't invest for yourself, your family, and your future,'" Ms. Allecta said.

Further, formal requirements be coming, and they could shine a brighter light on fund industry practices. In 1995 the Securities and Exchange Commission began crafting a proposal to increase reporting requirements for fund personnel; it is expected to be presented at an SEC meeting this summer.

Robert Plaze, an associate director of the Securities and Exchange Commission's investment management division, declined to say whether the agency has launched a formal investigation into Mr. Schonberg's trading activities. (He is reportedly being investigated by both Federal and New York State regulators.)

It is premature, Mr. Plaze added, to say that the episode illustrates a failure of the rules and guidelines on personal trading: "At this point it illustrates nothing."

Industry executives are anxiously watching developments at Dreyfus. "Something like this may very well cause the regulators to once again raise the question whether portfolio managers should be barred from trading for their own accounts-which I think is a very drastic step," said Mr. Scott of Massachusetts Financial.

Though an outright ban on personal trading by fund managers might do some good for the mutual fund industry's public image, there is something to be said for allowing personal trading to continue, said Geoffrey H. Bobroff, a mutual fund analyst based in East Greenwich, R.I.

Some people believe that allowing portfolio managers to stake their own money on securities they buy for their funds can be seen as a testimony of their conviction of their stock picks, Mr. Bobroff said.

Imposing a ban on personal trading by fund managers could make it difficult to attract talent to the industry, according to John Collins, a spokesman for the Investment Company Institute.

Mr. Collins said that if such a ban occurred, the fund industry could lose exactly the type of person it wants to attract-those with a keen trader mentality-to the hedge fund industry, which is not as intensely regulated.

"We have a competitive issue as it is with fund managers being lured away by hedge funds," said Mr. Scott of Massachusetts Financial.

The Investment Company Institute, which sprang into action when the Invesco episode broke in 1994, sees no reason to develop recommendations for further changes now, said Craig S. Tyle, general counsel.

Among the institute's proposals was the recommendation that the fund company include its policy on personal trading in the fund prospectus, noted Mr. Tyle. 'Our recommendations were quite strict and the industry has adopted them all at least in substantial part."

The Securities and Exchange Commission also took a look at the fund business after it disciplined Invesco's John J. Kaweske for failing to properly disclose personal trades he had made. Mr. Kaweske was fined $115,000 by the SEC and barred from the industry for five years.

Many firms have already adopted the SEC's proposals, said Mr. Connolly of BlackRock. "We continually review our procedures," said Mr. Connolly. "This is a very sophisticated industry; it's an ongoing process."

Ultimately, being a fund manager is about putting the investor first, said Laurence D. Fink, chairman and chief executive of BlackRock.

"If there are any issues related to a portfolio manager's personal gains that disrupt that notion that the customer comes first, then there's something wrong," said Mr. Fink.

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