Mr Eliot Spitzer, the New York attorney-general, will meet senior officials from the Securities and Exchange Commission (SEC) tomorrow in an attempt to co-ordinate their efforts in probing the mutual fund industry.

Today he will speak to the US Senate, where he will call for funds that permitted the practices at the heart of the scandal - "late trading" and "market timing" - to compensate investors.

Any profits made by such practices and any advisory fees received during the time they were permitted should be disgorged by the funds, he will say.

Mr Spitzer will also focus on the need to overhaul mutual fund boards and will call for board chairmen to be independent from fund management companies.

The SEC meeting is the first of a new committee designed to prevent territorial battles that have hit previous probes.

In an interview with the Financial Times, Mr Spitzer said he wanted board chairmen to realise they have a duty to protect shareholders, not management. "The single most critical point has to be bringing mutual fund boards back to where they should be in terms of who they have a fiduciary duty towards."

Mr Spitzer will tell the Senate that mutual fund boards have not been "adequately aggressive" in overseeing fund managers.

He will also call for funds to introduce tougher rules to stamp out improper trading and point to what he regards as excessive fees.

Mr Spitzer says regulators are still early in their investigations and are not in a position to hammer out a settlement with the industry.