Middle America relies on savings in mutual funds

The chairman of a major US mutual fund has resigned amid an investigation into whether he benefited from improper trading.

A lawyer for Richard Strong, head of Strong Mutual Funds, said on Sunday that he was standing down as the fund's chairman, though he will remain at the helm of its parent firm Strong Capital Management.

Mr Strong faces investigations by New York Attorney General Eliot Spitzer, the Securities and Exchange Commission (SEC) and Wisconsin financial regulators.

The investigations focus on whether Mr Strong carried out short-term trading in the company's funds which could harm investors.

Mr Spitzer has launched investigations into trading practices at several mutual funds, a method of saving used about half of US households.

Three US states are believed to be reviewing their relationship with Strong, the Reuters news agency reported.

Strong manages assets worth $42.7bn in total.

Spitzer's crusade

Last week Massachusetts' state pension fund sacked Putnam Investments as manager of $1.7bn of its assets after the SEC charged the firm with improper trading.

Mr Spitzer has criticised the SEC for slackness in overseeing the $7 trillion mutual funds industry.

This week, Mr Spitzer takes his crusade to Washington where he will give evidence to Senate and House committees on Monday and Tuesday, followed by the Senate Banking Committee on 13 November.

"The regulators who were supposed to have been watching this industry were asleep at the switch," Mr Spitzer told the CNBC TV channel on Thursday, adding: "I'm going to pull that switch".

Mr Spitzer won financial settlements from major US investment banks over their advice to investors during the dotcom boom.