There are already disturbing indications that the current mutual fund malfeasance investigation is going the way of other recent corporate governance scandals. After much hue and cry over the misdeeds, regulators promise stepped-up enforcement and executives promise to play by the rules. In reality, nothing much changes.

Testifying before Congress last week, the chairman of the Securities and Exchange Commission, William Donaldson, assured lawmakers that his agency had learned from past mistakes – it did not begin investigating possibly fraudulent schemes such as market timing and late trading until state regulators threatened to step in. Sen. Susan Collins, chairman of the Governmental Affairs Committee, properly wants more – if the SEC had information about specific misdeeds of specific companies, and it did, why didn’t it act?

Mr. Donaldson told the House the SEC would add enforcement staff and require that mutual fund board members be more independent. These are helpful steps, but more scrutiny and regulatory muscle should be directed at mutual fund fees, which, according to New York Attorney General Eliot Spitzer are $10 billion a year too high.

Unlike past corporate scandals, this one is about much more than the excesses of CEOs or the greed of fund managers. It is about investor confidence. Half of American families invest money in mutual funds. Because they offer diversity and safety, mutual funds have attracted small, unsophisticated investors. Mutual funds hold $7 trillion in investments for 95 million investors, many of them through a workplace 401(k) or other retirement plan. This investigation and the resulting reforms are about those who can least afford to lose money. Real improvements, not mere reshuffling, need to be made.

To restore shaken confidence, the SEC must do more than demand more independent directors on mutual fund boards. In his testimony to Congress, Mr. Donaldson said the SEC would require better disclosure of fees and other costs. The agency should go further, as Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan wrote to House members and ensure that disclosure requirements “be designed to provide investors with real value rather than serve mainly to increase costs and decrease returns.” In other words, mutual fund fees should be subject to the “competitive tests of the marketplace” with investors free to migrate to those funds with the lowest fees – if they can figure out which ones they are.

Beyond the changes promised by Mr. Donaldson and sought by a House-passed bill that includes the same measures, the SEC must commit itself to enforcing the rules so mutual funds no longer take advantage of ordinary investors to enrich fund managers, board members and wealthy clients.