U.S. mutual funds, which now hold over $12 trillion in assets, are one of the most successful investment vehicles ever developed. Begun in the Roaring Twenties, they survived the Depression, tough regulatory regimes, and a less-than-favorable tax system and came into their own in the 1950s. Critics argue that the...

The Investment Company Act of 1940—under which the Securities and Exchange Commission regulates mutual funds and other investment companies—was enacted when the industry was a fraction of its current size, when mutual funds were a rarity, and when most investment companies were managed by corporate boards instead of outside investment...