Could all of the educational efforts mutual funds and trade associations like the ICI have put into educating the public on mutual funds be insufficient?

You could certainly wish for more funding for education after viewing CNBC’s squawk box confusion over the difference between stocks and derivatives.

Before stepping into a recent Senate Finance Committee vote, Barney Frank was interviewed by a CNBC trio about the merits of letting shareholders set pay limits for TARP Fund recipients. The first dude came back with an off-handed statement about just letting the board of directors and senior executives of a TARP company sort things out.

Why get the shareholders involved? According to the ICI Fact Book, a shareholder is “An investor who owns shares of a mutual fund or other company.” Barney had to remind the fellow that shareholders are, literally, owners of a company; and, as such, are obligated to play a role in corporate governance.

The best was saved for last, when a squawk-boxer, said to Barney, “It seems to me that you’re dealing with a model (shareholder voting) that no longer works. We don’t have mom and pop sitting at home holding these shares. These shares are primarily in mutual funds and the ownership is a derivative instrument.”

Of course, without broad-based common stock shareholder participation, a good chunk of the equity markets — and still another $12 trillion — can vanish over night. Well, even if mom and pop are sitting at homing holding the shares, they still have ownership rights; even if they own shares of mutual funds only, they have the right to pressure the Fund board on matters of equity investment policy. This right, ensures, for example, that company selections have robust shareholder participation on stuff like, I don’t know, executive comp.

“These shares” confuses traditional equity investing with credit default swaps, options, and other derivatives. Whether it goes up or down, a stock is a real, tangible asset — unlike the derivative.

Squawkbox, heal theyself. You can download your free copy of the ICI Fact Book here.