Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Portfolio > Mutual Funds

SEC Demands Late Trading Information from Brokerag

Your article was successfully shared with the contacts you provided.

NEW YORK (–The Securities and Exchange Commission opened another front in the investigation into trading of mutual fund stocks by asking broker/dealers and the 80 largest mutual fund companies to provide documentation of such trades.

New York State Attorney General Eliot Spitzer started this line of inquiry, announcing last week a complaint against hedge fund manager Edward Stern, whose Canary fund specialized in timing mutual fund shares Previous HedgeWorld Story.

The SEC’s entry into the foray with a broad inquiry of its own is consistent with Chairman William Donaldson’s complaint that some state attorney generals did not keep federal regulators apprised of their probes into irregularities in the financial arena.

“We wish that he’d talked to us about it,” Mr. Donaldson said of Mr. Spitzer’s investigation, speaking at a Senate Banking Committee hearing on Tuesday.

The SEC wants brokerage houses to provide information about trades by their largest customers who do mutual fund trading. It also is asking about brokerages’ most lucrative customers. Brokers may have received higher than usual commissions in exchange for facilitating trading in mutual fund shares after 4 PM, a practice banned by regulations.

Whether a trading order was received before or after 4 PM and what was done with it if it came in after that deadline is among the key questions of interest to SEC staff.

In the meantime Mr. Spitzer has subpoenaed a number of hedge fund firms, apparently seeking evidence of special arrangements between them and mutual fund companies that allowed after-hours trading. Another prong of the New York investigation is focused on short-term trading of mutual fund shares–a violation of some funds’ prospectuses but not the law.

[email protected]


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.