TITLE

In Whose Interests?

AUTHOR(S)
Marcin, Barbara
PUB. DATE
November 2003
SOURCE
Journal of Financial Planning;Nov2003, Vol. 16 Issue 11, p19
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
One of the latest scandals to surface has been the improper trading of mutual funds by hedge funds and the agreements made by mutual funds to allow this activity. This activity took two forms: late trading or allowing certain hedge funds to trade after the 4:00 p.m. pricing close, which is illegal; and a form of market timing known as time-zone arbitrage, or allowing hedge funds to trade in and out of mutual funds, which are priced in the U.S. when its markets close, but which own securities traded outside of the U.S. This creates the opportunity to engage in time-zone arbitrage and is prohibited in many mutual fund prospectuses. As the complaint filed by Eliot Spitzer, attorney general of New York State, stated, both schemes involved the complicity of mutual fund companies that violated their fiduciary duties to their customers. This has been extremely disappointing to investors, who have used mutual funds as long-term retirement and other goals. These activities are detrimental to the interests and to the financial well-being of the long-term investor. The mutual fund industry is highly and well regulated. The prospectus for each fund describes the investment objective and the types of investments that are allowed.
ACCESSION #
11272553

 

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