Because they allowed a hedge fund to rapidly trade mutual funds, Merrill Lynch fired three of its brokers Friday one of a few pre-emptive measures by fund firms amid intense investigations in the industry.
And at Fred Alger Management, three employees were suspended after it became known that they may have allowed a client to participate in late trading.
The moves by Merrill Lynch and Alger Management indicate that firms would rather handle matters expeditiously and cautiously instead of waiting for investigators to meddle in decisions like employment and punishment, according to The Wall Street Journal.
The Merrill Lynch employees allegedly allowed Millennium Partners to trade more than five mutual funds rapidly, a maneuver that most experts argue tilts the playing field away from regular investors and toward the hedge funds.
"Merrill Lynch policies prohibit late-day trading and market timing," a company spokesperson told The Wall Street Journal. "We have not found late-day trading; our review has revealed certain instances of market timing. Consistent with the policy, disciplinary actions have been taken, and the information developed has been shared with the authorities."
Alger would not acknowledge which client was allowed to late trade, though the suspensions were confirmed to be a result of an internal investigation.