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Topic: Late trading

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	GAO-04-799, Mutual Funds: SEC Should Modify Proposed Regulations to Address Some Pension Plan Concerns
		Trading abuses can be difficult to identify because, among other reasons, fund brokers aggregate the transactions of their clients and often do not share details of individual transactions with mutual fund companies.
		The estimates of the effects of late trading and market timing on long-term shareholders should be interpreted with caution because of data limitations, small samples that may not be representative of the mutual fund sector, and assumptions that underlie the estimates.
		The report assesses the impact that late trading and market timing have had on the value of retirement savings of pension plan participants, describes the actions taken by the Commission and the Department of Labor to address these practices, and explains how plan participants may be affected by the Commission's proposed regulations.
	www.gao.gov /htext/d04799.html (11395 words)

	Banker Charged with Late Trading
		The effect of the disguise was to allow the hedge funds to engage both in illegal late trading and in market timing of the mutual funds, and to thwart the mutual funds from enforcing their anti-timing rules.
		As to late trading, after noting that trades could be submitted up until midnight, he wrote: "A pricing list is prepared by the company and submitted to our clients who are then able to run their timing models against actual closing prices instead of the previous day before they submit trades.
		In a late trading scheme, however, favored traders are unlawfully allowed to execute trades well after the 4 p.m.
	www.oag.state.ny.us /press/2004/feb/feb03b_04.html (772 words)

	Boston.com / Business / Late trading may be more widespread than thought
		Illegal after-hours trading in mutual funds, which has spawned a large and growing number of federal and state investigations over the past week, may be more widespread than previously thought and may cost shareholders $400 million a year, according to a Stanford University study.
		He found evidence of late trading in the international funds of 15 out of 50 fund families he analyzed, compared with domestic funds in only 12 of 96 instances.
		Late trading in fund shares is one of the two practices that led New York Attorney General Eliot Spitzer to fine the Canary Capital Partners hedge fund $40 million last week, and launch a broad investigation of the mutual fund industry.
	www.boston.com /business/articles/2003/09/12/late_trading_may_be_more_widespread_than_thought (862 words)

	Did Lawyers Sign Off on Late Trading?
		An emerging advice-of-counsel defense could prove especially problematic for the investigation into allegations of late trading, an activity in which a mutual fund company permits a favored customer to buy shares that were priced prior to the release of market-moving news.
		Late trading has emerged as one of the most serious offenses prosecutors and regulators are examining in the quickly expanding investigation into the $7 trillion mutual fund industry.
		But people familiar with the investigation said a number of high-powered lawyers have written legal opinions for their brokerage clients saying the prohibition on late trading is not as clear-cut as it's been made out to be.
	www.thestreet.com /pf/markets/matthewgoldstein/10125310.html (791 words)

	Mutual fund trading scandal
		Late trading, which is illegal, occurs when a trade is initiated after a mutual fund is closed, usually at 4 p.m.
		Late trading has been compared to betting on a horse race after it is over - a late trader can realize the value of major financial news or world events that are announced after a fund’s closing time without having to pay for it.
		The Securities and Exchange Commission, in an October press release, suggested that an appropriate remedy for late trading is to issue a rule that requires that all trades be received by mutual funds by the fund’s closing time.
	www.psca.org /er/dec03/scandal.asp (749 words)

	Late trading of mutual funds likely costs $400 million annually, expert says (Site not responding. Last check: 2007-10-15)
		Late trading in the mutual fund industry may have cost shareholders in these funds up to $400 million per year since 2001, Eric Zitzewitz, an assistant professor of strategic management, asserts in a new paper studying the practice.
		Late trading occurs when investors placing trades in mutual funds after 4 p.m.
		He said he found statistically significant evidence in the sample that late trading had occurred in international funds of 15 of 50 fund families and in 12 of 96 domestic fund families.
	www.stanford.edu /group/news/report/news/2003/september24/zitzewitz-924.html (596 words)

	USATODAY.com - Banc One fined $400,000 in late trading case (Site not responding. Last check: 2007-10-15)
		Late trading involves favored customers receiving the market-closing price for fund shares for orders placed after the stock market closes for the day at 4 p.m.
		Late trading is prohibited by the NASD and the Securities and Exchange Commission to ensure that all fund investors are on the same footing as to news information and share price.
		"Late trading is illegal and to prevent it, firms must implement systems to guarantee that all mutual fund orders processed after the close of the market were received during normal trading hours," NASD Vice Chairman Mary Schapiro said.
	www.usatoday.com /money/perfi/funds/2005-01-12-bancone-fine_x.htm?POE=MONISVA (572 words)

	Amy Domini on Market Timing and Late Trading - 11/18/03
		Although market timing by an investor is not illegal, it drives up portfolio trading costs that are borne by all investors in the fund and creates “dilution” costs (the costs associated with one investor cashing out a quick profit based on the discrepancy between the fund’s net asset value and shifting security prices).
		“Late trading” is the practice of entering or confirming trades after the close of trading for the day.
		Late trading should not be confused with certain permissible and common practices that allow intermediaries, such as retirement plan administrators, to receive trades from investors made before the close of trading for the day and to transmit them to mutual funds after the close of trading.
	www.domini.com /about-domini/News/Press-Release-Archive/Market_Timing_ltr_11-031.doc_cvt.htm (1029 words)

	Proposed Rule: Amendments to Rules Governing Pricing of Mutual Fund Shares; Rel. No. IC26288
		A late trader can exploit events occurring after 4:00 p.m., such as earnings announcements, by buying on good news (and thus obtaining fund shares too cheaply) or selling on bad news (and thus selling at a higher price than the shares are worth).
		Our investigations and examinations are ongoing, but to date suggest that late trading of fund shares is not isolated, nor is it limited to any one type of fund or intermediary.
		Late trading not only violates rule 22c-1, but managers who permit late trading also breach their fiduciary duties to the funds and fund shareholders.
	www.sec.gov /rules/proposed/ic-26288.htm (11006 words)

	Comments of The Vanguard Group, Inc. on S7-27-03
		Unfortunately, it has been discovered that certain intermediaries engaged in illegal late trading by submitting mutual fund orders for current-day pricing that were not properly received from customers prior to the required 4 p.m.
		While intermediaries that engage in unlawful late trading face severe consequences, the Commission has determined that more must be done to eliminate the possibility of late trading and restore the trust and confidence of mutual fund investors.
		To eliminate late trading through fund intermediaries, the Commission proposes to require that all purchase and redemption orders be received by the fund, a single transfer agent designated by the fund, or a registered clearing agency no later than 4 p.m.
	www.sec.gov /rules/proposed/s72703/vanguard020604.htm (2904 words)

	Mahalanobis
		Late Trading and Market Timing, The Review of Securities and Commodities Regulation, Vol.
		Usually the deal was, give us X dollars, and you can engage in late trading (eg, jumping in and out of the fund at stale prices, usually only a few hours old.
		I can't believe those at the top of the funds, their superiors, would allow this to happen except if they were incompetent (didn't know what was happening) or malicious (enjoyed making a few million extra by taking money from the average investor).
	mahalanobis.twoday.net /stories/514155 (388 words)

	TCS: Tech Central Station - Late Trading and The Horse Race Fallacy (Site not responding. Last check: 2007-10-15)
		Late trading gets special attention here not just because it is an SEC violation, but because Spitzer has singled out the act as a particularly bad one; at one point telling the Wall Street Journal that late trading is the equivalent of "betting on a horse after the horses have crossed the finish line."
		By the Spitzer/major media definition of late trading, the above news would clearly be an example of the kind of late trading opportunities that existed for preferred investors.
		If long-term shareholders in the end actually benefited in total from timed and late trades (per Fisher's assertion) does not mean those who violated SEC rules against the latter should not be punished.
	www.techcentralstation.com /012804C.html (746 words)

	Study: Late trading in funds widespread - The Washington Times: Business (Site not responding. Last check: 2007-10-15)
		The study by Stanford University professor Eric Zitzewitz found that late trading — in which investors are allowed to trade after the close of markets at preclosing values — appears to be happening in one out of six mutual fund families, at a cost to ordinary investors of $400 million a year.
		Among domestic funds, late trading appeared to occur in 12 of 96 fund families, costing shareholders less than a penny per $100 invested.
		He agreed that the study does not necessarily implicate fund firms, but instead suggests late trading is prevalent — whether fund companies knew it or not.
	www.washtimes.com /business/20030922-095355-7667r.htm (795 words)

	Institute President Testifies on Trading Practices and Abuses That Harm Investors, November 2003
		With respect to personal trading activities of senior fund personnel, the Institute is urging its members to clarify or amend their codes of ethics to require oversight of trades by such persons in any mutual funds offered or sponsored by the company.
		Thus, with respect to personal trading in fund shares by portfolio managers or a fund's senior executives, the Institute is urging all mutual funds to clarify or amend their codes of ethics to require oversight of personal trading activity by these persons in any funds offered or sponsored by the company.
		The alleged abusive late trading and market timing activities recently uncovered by the New York Attorney General and the SEC are deplorable.
	www.ici.org /statements/tmny/03_sen_fink_tmny.html (6204 words)

	Socially Responsible Investments Remain Largely Untouched by Late Trading Scandals (Site not responding. Last check: 2007-10-15)
		Late trading, which Attorney General Spitzer likened to betting on a race after the horses cross the finish line, involves the trading of mutual fund shares after markets close at four o'clock in the afternoon Eastern Standard Time.
		SEC) regulations prohibit late trading because it enhances the value of shares held by these privileged insiders while diluting the value of other shares.
		And although SRI firms avoid participation in late trading, insulating SRI shareowners from the effects of late trading altogether would prove difficult.
	www.socialfunds.com /news/print.cgi?sfArticleId=1267 (769 words)

	State Investigation Reveals Mutual Fund Fraud
		The agreement further commits the hedge fund and its officers and employees to continue to cooperate in the Attorney General's ongoing investigation of the mutual fund industry.
		Late trading is prohibited by the Martin Act and SEC regulations because it allows a favored investor to take advantage of post-market-closing events not reflected in the share price set at the close of the market.
		Canary obtained special trading opportunities with leading mutual fund families – including Bank of America's Nations Funds, Banc One, Janus and Strong – pursuant to undisclosed agreements that involved substantial benefits for the fund management companies.
	www.oag.state.ny.us /press/2003/sep/sep03a_03.html (627 words)

	How market timing and late trading hurt fund investors - Sep. 4, 2003
		Late trading, an illegal activity, is a similar strategy with one exception.
		Trades are placed after the market close yet the trader gets to buy in at that day's net asset value (NAV) per share.
		There are no studies measuring the financial impact of late trading, but the way in which it might influence investor return is similar to that of market timing.
	money.cnn.com /2003/09/04/funds/individualcost (656 words)

	Late Trading and Market Timing, the Latest Wave of Claims Against Financial Institutions (Site not responding. Last check: 2007-10-15)
		Spitzer revealed that his office had uncovered the widespread use of improper trading practices known as "late trading" and "market timing" in the $7 trillion mutual fund industry.
		A growing number of financial institutions have disclosed that late trading and market timing occurred in some of the nation’s largest mutual funds.
		This article examines late trading and market timing, and provide an overview of the widening investigations and increasing number of class action lawsuits.
	www.sdma.com /sedgwick.updates/articles/litigation-trial?art_lit_trade.html (197 words)

	Buffalofunds -- Market Timing and Late Trading
		We strongly support the SEC* in their efforts to eliminate late trading and market timing abuses, as well as their diligence in holding accountable those responsible for violating federal securities laws.
		Late trading is prohibited by regulators because it allows a favored investor to take advantage of post-market-closing events not reflected in the share price set at the close of the market.
		Financial intermediaries who accept trades on behalf of The Buffalo Funds are required by law, by prospectus and by agreement with USBFS as our transfer agent, to "police" all orders to ensure that they are in good form and received in a timely manner.
	www.buffalofunds.com /news/late_trading.html (914 words)

	DFA Late Trading FAQs
		Short-term trading, which may increase the number of trades in the Funds, may disrupt the Funds' investment strategies and increase the Funds' transaction costs.
		We understand the first SEC letter was sent to the 80 largest fund companies, and requested information about market timing, late trading, and distribution of portfolio holdings information.
		We understand the second letter was sent to mutual fund families with funds that invest at least a majority of their assets in international securities, and asked about the fair value pricing of those securities.
	www.ifa.com /DFA/dfalatetrading.htm (851 words)

	Wired News: Late Trading Coming to Nasdaq (Site not responding. Last check: 2007-10-15)
		All trades would be reported and displayed in real time and all investors would have equal access to trading during the session, Nasdaq said.
		All the trades taking place in the late session would be calculated as part of the next day's data.
		A late session, if approved, would be likely to start around Labor Day, NASD president Richard Ketchum told a group of Nasdaq brokerage firms on Tuesday, according to a person at the meeting.
	wired-vig.wired.com /news/print/0,1294,19928,00.html (419 words)

	Prudential Charged With Late Trading (phillyBurbs.com)
		BOSTON - Massachusetts' top financial regulator is targeting Prudential Securities Inc. with charges of late trading for lucrative hedge fund customers, calling the charges part of a pattern in which smaller investors were placed at a disadvantage.
		The allegations, which were expected, came a month after Galvin charged five former Prudential brokers with fraud in a related mutual fund market timing and late trading scheme.
		Late trading allows a favored investor to take advantage of any events after the market closes that are not reflected in the fund's closing price.
	www.phillyburbs.com /pb-dyn/news/24-12122003-212045.html (399 words)

	The Mutual Fund Trading Scandals
		According to the financial press, many of the participants in the fund trading scandals were executives, portfolio managers and employees of the investment adviser who personally participated in the fund trading scandals and made illegal profits, or permitted favored shareholders to do so in return for lucrative business arrangements.
		The SEC has responded to the mutual fund trading scandals by promulgating a wide variety of new rules designed to prevent future scandals and disclose more information to shareholders and their investment advisers.
		With the fund trading scandal touching so many investment advisers associated with major mutual funds, it is highly likely that an investment adviser has recommended or is considering investing in one of these funds.
	www.aicpa.org /pubs/jofa/dec2004/carroll.htm (3327 words)

	Rednova NEWS \| Stocks Decline in Late Afternoon Trading (Site not responding. Last check: 2007-10-15)
		In late afternoon trading, the Dow Jones industrial average fell 26.83, or 0.2 percent, to 10,678.81.
		The Dow opened in positive territory because trading in Pfizer, a Dow component, was delayed due to the Celebrex news, then fell into negative territory once Pfizer began trading after 10 a.m.
		Stocks can vary widely and trade quickly on heavy volume as investors cash in their options or futures and sign up for new contracts.
	www.rednova.com /modules/news/tools.php?tool=print&id=112143 (792 words)

	Print Article: Broker guilty of late trading charge (Site not responding. Last check: 2007-10-15)
		A former broker with Millennium Partners hedge fund pleaded guilty in New York on Thursday to a felony charge for illegal late trading of mutual fund shares, part of a quickly broadening investigation that has touched many of the best-known names in the business.
		Investors who engage in late trading can take advantage of events that occurred after the markets closed and profit in ways other shareholders can't.
		The criminal complaint said Millennium's illegal trades occurred from late 2001 or early 2002 through July 2003.
	www.smh.com.au /cgi-bin/common/popupPrintArticle.pl?path=/articles/2003/10/03/1064988381010.html (444 words)

	Prudential charged with late trading - Fund Scandal - MSNBC.com (Site not responding. Last check: 2007-10-15)
		As part of the scheme, Prudential's hedge fund clients would send the Boston office a preliminary list of possible trades that were time-stamped and put aside until after the markets closed, the complaint said.
		After 4 p.m., those clients would telephone Prudential brokers in Boston to confirm money-making trades that were then faxed to Prudential's trading desk in New York for processing, according to the complaint.
		The negotiations involve settling the separate issue of whether Alliance allowed improper trading in its funds at the expense of ordinary fund holders.
	www.msnbc.msn.com /id/3684123 (948 words)

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