Federal Reserve employees, along with members of the Boilermakers Union have been practicing market-timing in order to make a quick profit in international mutual funds, The Wall Street Journal reports.

Apparently, the rapid in-and-out trading has been so fast and furious that letters have been sent to current and retired shareholders of the Fed’s employee thrift plan, run by T. Rowe Price, to discourage the practice. Several rule changes have been implemented, as well.

A spokesman for T. Rowe Price, while admitting "frequent trading activity," said that no employee, whether current or former, was privy to any insider information that would make the trades illegal. Market-timing, while technically not illegal, can have an adverse effect on long-term shareholders because it dilutes the net asset value of the fund.

The New York Local 5 Boilermakers Union made $4 million in profits from market-timing in its plan, run by Putnam. Putnam, however, decided Monday to stop managing the union’s retirement plan in an effort to distance itself from the questionable practices.


The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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