Last Tuesday, New York Attorney General Eliot Spitzer announced another eye-popping settlement with two firms implicated in his ongoing investigation of trading abuses in the mutual fund industry.

The latest shoes to drop belonged to the soon-to-merge Bank of America (NYSE:BAC) and FleetBoston Financial (NYSE:FBF). Together, the two agreed to pony up more than half a billion dollars in restitution and penalties and to -- get this -- trim the costs of their mutual funds over the next five years to the tune of $160 million.

The attorney general's office estimates a sum total of the settlement, which the Securities and Exchange Commission helped negotiate, in the neighborhood of $675 million. That would be the most extracted in the unfolding scandal and a serious chunk of change commensurate with the substance of the allegations.

I couldn't be more pleased. My work in the industry, lately with our just-launched Motley Fool Champion Funds, brings me into contact with fund managers and fund investors alike. The vast majority of both groups are decent, honest people, and the few bad apples have hurt everyone involved -- though admittedly in different ways.

Keep in mind, Bank of America's Nations Funds unit was singled out in Spitzer's initial complaint for allowing late trading, and let's be clear: Unlike market timing, which is unethical but not necessarily illegal, late trading is against the law. Spitzer even likens the practice, by which privileged investors buy or sell funds after the 4 p.m. close, to betting on yesterday's horse races.

The settlement with BOA and Fleet, whose Columbia Management subsidiary was targeted in the probe, also breaks new punitive ground in the unfolding scandal. Spitzer and the SEC have wrung big bucks and fee reductions from other firms, including Alliance Capital (NYSE:AC) and Sun Life Financial's MFS unit. This time, eight members of the board of directors of Nations Funds will be shown the door, apparently for looking the other way while the shop's mandatory redemption-fee policy specifically exempted a hedge fund that subsequently timed two of Nations' funds.

In related news, the country's 91 million fund investors had something to say on the matter: Hooray!

Spitzer's investigation confirms many an investor's worst fears about the mutual fund business. But it also paves the way for serious reform. Mandatory redemption fees (which discourage market timing), strict curbs on "soft-dollar arrangements," and fuller disclosure of how fund managers are compensated are all on the table.

What next? Likely more of the same. Keep your eyes open and stay informed. If you're a fund investor (and who isn't?) and if you want to beat the market (who doesn't?), you are navigating a landscape that is increasingly treacherous. Fund investing may not be rocket science, but it's getting pretty close.

Don't like rockets or science? Take a free trial of Motley Fool Champion Funds . Just click here . Shannon Zimmerman is editor and top analyst of Champion Funds and owns none of the stocks mentioned here.