WASHINGTON (HedgeWorld.com)–The U.S. Securities and Exchange Commission so far has collected US$1.4 billion in disgorgement and US$1 billion in penalties in mutual fund trading scandals, and SEC Chairman William Donaldson is on a mission to boost ethical investment practices.
In a recent speech, Mr. Donaldson told lawyers that much of the “anguish” over the scandals could have been avoided if lawyers had informed their hedge fund clients that late trading of mutual fund shares is illegal and that market timing and quid pro quo “sticky asset” arrangements are unethical.
“That sort of common-sense advice would have been more effective in keeping the client out of trouble than engaging in rhetorical somersaults to justify the activities the client wanted to pursue,” Mr. Donaldson said in a speech at a conference sponsored by the Practising Law Institute.
To date the only hedge fund to pay market-timing fines by SEC mandate has been Canary Capital Partners LLC, Secaucus, N.J., although other hedge funds and brokers have been implicated in the scandal.
Mutual fund companies snagged so far by the SEC are: Banc of America Capital Management; Pilgrim Baxter & Associates; Fremont Investment Advisers; RS Investments; Franklin Templeton Advisors; PIMCO Funds; Invesco; Bank One Corp.; Strong Capital; and Alliance Capital.