Eliot Spitzer's fall from grace brought with it a chance for critics to kick him in the butt on the way out the door. As critics debated his...

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Eliot Spitzer’s fall from grace brought with it a chance for critics to kick him in the butt on the way out the door.

As critics debated his legacy, the consensus seemed to be that he’ll be more remembered as “Client No. 9” — his purported designation with the Emperor’s Club escort service that was exposed recently — than as the “Sheriff of Wall Street,” the guy who took on the big investment houses and beat them into submission. During his time as attorney general, the now-resigned governor of New York was able to reach multiple settlements with big investment firms, but he almost never got to the individuals behind the bad research, bid-rigging and other bad actions that he was desperate to quash.

Most of his individual prosecutions have either languished in court, or his targets have fended off the charges.

He was largely responsible for shining a light on the mutual-fund rapid-trading scandals in 2003, which critics now say were a lot of noise about almost nothing, since few investors were directly hurt by the actions of the bad guys.

Industry insiders cast him as a bully and the Securities and Exchange Commission said he overstepped his jurisdiction and actually hurt their actions, and those critics are now crowing about his downfall.

The truth, however, is that Spitzer’s biggest, most lasting impact came in the fund industry, and in a lot of ways that ordinary investors don’t think about and fail to appreciate.

Moreover, by uncovering the fund scandals when he did, he saved Wall Street from a much larger problem that, in hindsight, would appear to have been an inevitable consequence of the bad behavior that was happening in the fund world.

Most notably, today’s shareholders benefit from stepped-up compliance requirements and disclosure rules.

Investors may not recognize that fund directors must now justify why they renewed a manager’s contract, but directors realize that the decisions they make — and the reasons for those choices — will be scrutinized by shareholders and, more importantly, the plaintiffs bar, looking to make a case.

Requiring a majority of a fund’s trustees to be independent also came from the fallout of the scandals.

“It’s not the numbers in the settlement that matters,” says Geoff Bobroff, a consultant, fund director and industry observer whose firm is based in East Greenwich, R.I.

“Just look at the compliance function inside the world of mutual funds. The most significant lasting contribution is elevating compliance to a core fundamental priority. … Don’t look at the shops that had great compliance to begin with — firms like Vangaurd or T. Rowe Price — but look at the small firms that didn’t care much. … Investors are safer in funds today, and there’s no denying that Spitzer had a hand in that.”

Chuck Jaffe is senior columnist at MarketWatch. He can be reached at cjaffe@marketwatch.com or Box 70, Cohasset, MA 02025-0070.