The SEC has suffered a pair of setbacks in its attempts to discourage intermediaries from recommending that their clients sell funds after holding them for only a short time and then use the proceeds to buy new, hot-performing funds.

In separate decisions late last month, two of the agency's administrative law judges held that intermediaries who switched investors out of funds after holding periods of as short as 16 months, did not violate federal securities laws. Indeed, in one case, the judge ruled that some switches that Richard Hoffman, a registered representative of Palm, Pa., admitted were improper, were inadvertent mistakes and did not violate federal law.

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