Many investors are wondering what to do about owning a U.S. mutual fund from an asset manager embroiled in the scandal that has rocked the industry since September. The misdeeds range from allowinghedge funds to trade inappropriately, and sometimes illegally, in mutual funds, to portfolio managers trading in their own funds, plus an array of marketing abuses.

First, the big picture: Despite a major black eye for the $7 trillion U.S. mutual fund industry, cash continues to flood in. Indeed, investors poured more than $20 billion into equity funds in both October and November than they took out. They realize, ‘The bear market is over and I’d better be in stocks again,'” said Don Cassidy, a senior analyst at Lipper. Fund inflows are correlating highly with the upward movement in the market.

But for investors wondering whether to stick with the fund companies implicated in the scandal, the following points may help in the decision:

Taxes. Bailing out could mean a big tax bill. What if you’ve owned a fund for 25 years and have big capital gains? Cassidy said. You might have a big tax problem unless you have losses somewhere to offset that. It’s a personal choice.

On the other hand, if the fund has had a disappointing performance, on top of being caught up in the scandal, it could be another reason to sell, using the tax loss to offset a gain somewhere else.

The fund, not the company. It may be worthwhile to stick with a top-performing fund from a company tarred by the scandal. Janus Capital was accused of trading abuses with a hedge fund, but the Janus Mid Cap Value Investor fund has an outstanding record. Moreover, the fund is managed by Perkins, Wolf & McDonnell, an outside firm that is uninvolved in the scandals. Morningstar, the Chicago-based fund researcher, has urged investors to consider selling Janus funds but noted that Mid Cap Value was worth keeping.

Another example is Marsico Capital Management, led by Tom Marsico, a respected and successful portfolio manager. The firm is owned by the Bank of America, whose Nations Funds group was among the first to be named for misdeeds. But the Marsico offerings have not been named in any investigation, and they are run completely separately. They, too, have Morningstar’s approval.

Funds in pension plans. Investors in a 401(k) pension plan who own a fund from a company under investigation can switch to another fund offered by the plan without tax consequences. But if it’s a core fund like a large-cap offering and there is no similar replacement, you should stick with it, said Dan Culloton of Morningstar. You can live without a health care fund but not without a key building block.

No big payday. Do not hang on to a fund you would otherwise dump in anticipation of a fat restitution payment. Janus has said it will pay $31.5 million to investors hurt by improper trading, but analysts warn that that could be as little as a penny a share. Sheldon Jacobs, editor of the No-Load Fund Investor newsletter, figures that a typical shareholder will get about $15. It won’t mean much unless you have a huge account, he said.

In another example, Alliance Capital Management, as part of a settlement with securities regulators, said it would cut fund fees by 20 percent. But some of its fees were well above average, Culloton said, so they will still be high.

Understandably, many investors are shocked by the lack of ethical standards revealed in the scandals and will sell funds involved regardless. I got flak from my readers, Jacobs said, describing the reaction to his maintaining positive recommendations on two top performers, Janus Mid Cap Value and the Strong Mid Cap Disciplined fund, which was from an asset manager whose founder has resigned under fire.

For those who dump a fund, the move can be easier in light of the many successful, ethical fund companies out there. Look for low fees and a focus on investing, not marketing, industry observers say. Among companies to consider are Vanguard Group, known for rock- bottom fees and index funds; Fidelity Investments, a marketing powerhouse, but one with superior performance and reasonable fees; and American Funds, the low-profile California manager known for performing well in up and down markets. Smaller firms with strong reputations include Longleaf Partners, the Davis Selected Advisors Group and Dodge & Cox.

And remember, said Jacobs, considering the stricter regulations that are sure to come, and the damaged reputations of the firms involved in the scandal, whatever may have been done in the past is coming to a screeching halt.