So speaking of scandals
which I did today in an earlier post
and knowing who will be next and how much does it take for ordinary investors to think things are really stacked against them and rigged?????
read below:
Scandal shakes fund shareholders
By Jonathan Burton, CBS.MarketWatch.com
Last Update: 2:14 PM ET Sept. 3, 2003
SAN FRANCISCO (CBS.MW) -- Shareholders who thought their fund companies were above reproach had that trust broken Wednesday as several were charged with trading abuses.
The illegal practices enriched fund managers at shareholders' expense, according to New York Attorney General Eliot Spitzer.
Fund industry observers were taken aback by the magnitude of Spitzer's allegations.
"I find it absolutely stunning and almost inconceivable that anything like that could possibly go on with any fund firm that has even a hint of value to its reputation," said Jack Bogle, founder of fund giant Vanguard Group and an outspoken fund industry critic.
Four fund families including Bank of America's (BAC: news, chart, profile) Nations Funds, Banc One (ONE: news, chart, profile), Janus Capital Group (JNS: news, chart, profile) and Strong allowed a hedge fund called Canary Capital Partners to trade their funds after the market close, in violation of federal law, Spitzer said. He likened the late trading to "betting today on yesterday's horse races."
Additionally, Spitzer said the fund companies permitted market timing of their funds -- trades based on expectations of very-short-term gains -- when their prospectuses specifically assured investors that such practices were discouraged.
In exchange for these special arrangements, the fund companies allegedly received substantial investments into some of their funds, enriching the assets under management -- and themselves, Spitzer charged.
"This is a 'go to jail' accusation; this is not a slap on the wrist," added Louis Harvey, president of Dalbar, a financial-services market research firm in Boston that advises fund companies. "I've never seen any infraction of this scale in the fund industry."
Mutual funds are priced once daily at the market's 4 p.m. EST close. Spitzer says the funds illegally allowed Canary to buy shares at the day's closing price after the close, taking advantage of any market-moving events occurring after the close.
"The late-trader's gain is the long-term investor's loss," Spitzer said in the complaint filed against the fund companies.
"Buying late in the day dilutes the current shareholders," said Geoff Bobroff, a fund industry consultant. "This is raising the inherent conflicts that exist in the industry, with the manager making sure that he benefits even though there might be some diminishment of value to their investors
AI
