Call it the $3 billion conundrum. The consultants, academics and financial firms working with the SEC and other regulators to determine who should receive the $3 billion-plus collected from the market-timing scandal--and how much--continue to wrestle with the problem, The Baltimore Sun reports.
The key problem is that many of the investors who had money in the funds that were market timed held them in 401(k) accounts through which their trades were consolidated in omnibus accounts. And because these trades date back to the 1990s, many of these people may have since closed their accounts without leaving a forwarding address.
All of this analysis and paperwork will be expensive, of course, and will have to be deducted from the pool. Complicating matters further, the IRS is trying to determine if the payouts should be taxed.
Larry H. Goldbrum, general counsel of the SPARK Institute, suggests that the government send checks only to those who are still invested in the funds affected and, rather than track down individual trades and match them against those of the market timers, it should use average or month-end account balances.
And at the end of the day, some analysts say, the question arises whether all of this trouble is worth it. By one estimate, 90% of the investors who had money in the funds that were market timed or late traded will receive less than $10 apiece.