(Dow Jones) His name and title are less important than his potential impact.

That's why it didn't ring a bell with most mutual-fund investors this week when the U.S. Securities and Exchange Commission announced that Andrew "Buddy" Donohue, the agency's director of the Division of Investment Management, will step down in November.

The typical fund investor hasn't got a clue who Donohue is or what he has done in his SEC job over the last four years.

But since industry insiders argue over whether the director of the Division of Investment Management should be called the agency's "fund czar" or its "top fund cop," there's no denying that whoever has this gig has the potential to influence a lot of key issues facing the fund industry today.

Donohue, who was global general counsel at Merrill Lynch Investment Managers before joining the SEC, was credited by the agency with improving the oversight of money-market funds, as well as for his efforts to overhaul 12(b)-1 fees in the fund industry.

Since Donohue is leaving at a key time in the evolution of mutual funds, whoever replaces him faces big issues with the potential to change the way individual investors interact with fund companies and feel about funds and financial advisers.

Here are the issues that a new fund czar must help to steer and shape: 

 
Fiduciary responsibility for advisers

On the surface, this does not seem to be a fund issue, but it clearly is. The dirty little secret of financial advice is that only some types of advisers have a fiduciary responsibility to their customers, meaning they are required by law to put their client's best interests first. Other types of adviser, most notably people acting as brokers, must adhere to a "suitability standard," meaning an investment merely must be suitable, rather than "in your best interest."

Congress was wrestling with this issue, but booted it out of the financial-reform package and kicked it over to the SEC to study by January, with proposed rules to follow soon thereafter. The new big cheese at the Division of Investment Management will have a lot of say here, and if he chooses not to protect investors on this one, it will send a big message that the new top fund cop is soft on protecting consumers. 

 
Completed reform of 12(b)-1 fees

The SEC is finally moving forward with fund reforms that should make it clear to consumers how much money they are paying for actual investment management, compared with ongoing charges to a financial adviser or for the marketing of the fund.

Depending on how this reform goes forward, there's real potential to create confusing new share classes, to generate problems for investors who change brokers, and much more. There is also the possibility that funds will simply recapture the missing fees by coming up with creative new ways to skin the shareholders.

This is one reform package that could eliminate a lot of confusion if it has teeth, but which will bamboozle investors if it doesn't. 

 
Revenue sharing between funds and advisers

If the SEC cuts back or eliminates 12(b)-1 fees, one way the fund companies could get around it would be to raise costs and simply create a revenue-sharing plan with the advisers who sell the fund. Up to now, the SEC has ignored this idea, but if they don't close the door to it before finishing with 12(b)-1 changes, this will be the first tactic fund companies use to maintain profit margins and keep advisers fat and happy. 

 
Rapid trading in exchange-traded funds

There's little question that fast turnarounds in ETFs, particularly leveraged funds, can contribute to a "flash crash." Where day-trading of stocks added liquidity to the market, day-trading of ETFs-entire baskets of stocks-enhances market volatility.

At some point, the SEC or the government will want to install trading curbs, such as not allowing round-trips that are completed in, say, less than 12 seconds. (Think big, Washington! Start with 30 seconds!) Failing that, this problem will only be sorted out after another flash-trading-driven blow-up. Sadly, we should all expect that to happen. 

 
Regulate 'alternatives' that the fund world uses to dodge rules

As the SEC and the Labor Department look not only at fee rules but consider changing some aspects of running a 401(k) plan, it's entirely possible that some retirement plans will abandon funds for "collective investment trusts."

These are pooled vehicles, just like funds but without the regulatory oversight. Among the benefits to the fund company, this means they can hide fees or charge bigger ones. Instead of getting the greater transparency that is behind the rule changes, some retirement savers could find themselves in the heart of darkness.

There will be other big issues for the new fund czar to tackle and watch over, from changes in sales documents used by advisers to share class mumbo-jumbo spawned by the 12(b)-1 reform.

It's a big job; let's hope the SEC finds the right person to fill it.

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