The Securities and Exchange Commission has unearthed yet a new type of mutual fund market timing, charging an Urbana, Ill.-based Internet day trader with three counts of violating exchange laws. The case further underscores the Commission's heightened scrutiny of the fund industry.
Thomas E. Edgar, a 65-year-old aerospace industry retiree, is accused of a manipulative trading practice known as "marking the close," or placing orders right before the close of the market in order to influence the closing price. On about 119 occasions over the course of four years, Edgar allegedly placed buy and sell orders on closed-end mutual funds averaging 100 to 200 shares at or near the close of the trading day. Just after placing these orders, Edgar submitted limit orders for the next day, either to sell shares at higher prices or purchase shares at lower prices. The SEC said Edgar priced these orders at the closing market value to ensure that his orders would be executed ahead of any others.