Mutual funds are still at risk from market timing despite regulation to stop it, according to three-quarters of the funds' chief compliance officers, Financial Times reports.
In addition, more than eight out of 10 officers surveyed believed that trading practices, the valuation of securities, and e-mails were areas of risk where there could be a compliance failure for the funds, according to a survey of 100 CCOs released Monday.
The poll, conducted by PNC Financial Services in April, reveals that the funds remain at risk from the same problems that existed prior to the scandal. In September 2003, it was uncovered that short-term traders such as hedge funds had been arbitraging mutual fund company shares to the detriment of long-term investors, and with the complicity of many fund companies.
Funds with more than $25 billion in assets were twice as likely to cite trading practices as a high or moderate risk, and three times as likely to cite securities valuation as a high risk, the survey said.
A compliance risk meant they might fail to comply with internal fund controls or external laws or regulation, according to the report.
More than half of these larger companies, compared with less than 10% of the small ones, said they would have difficulty implementing the hard 4 p.m. close for trading, imposed as a result of the market timing imbroglio. It was originally designed to stop investors from buying or selling mutual fund shares after the closing bell, when the net asset value (NAV) of the funds was set.
Among the 14 packages of reforms proposed by the Securities and Exchange Commission in the wake of the scandal, the strongest support was for soft-dollar reforms, although barely half said this was "fair and reasonable."
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.