The Securities and Exchange Commission’s probe into the mutual fund industry has now expanded to an investigation at the heart of how fund timing and/or late trading could have occurred in the first place: whether some fund companies allow large investors to peek at their holdings, officials told Reuters.

"It’s clearly an area that we’re focusing on," said the executive, Paul Roye, leader of the SEC’s division of investment management. "We’ve contacted most of the fund groups in the country on this very issue."

Funds typically open up their portfolios only a few times a year, and by law must do so at least twice, but the SEC is looking into whether certain clients became privy to the information much more often than that. Roye said the situation "could involve insider trading," and added that "it raises issues about fiduciary duty."

Investment Company Institute spokesman John Collins told Reuters, "The funds are being cooperative and reviewing their own internal procedures."

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