A subplot to New York State Attorney General Eliot Spitzer’s recent criminal charges against Bank of America and three fund companies for allowing hedge fund Canary Capital to trade fund shares after hours is the distinct possibility that instead of twice-a-year disclosures, Canary had daily insight into their holdings. As a result, regulators might soon force mutual fund companies to report specifics of their portfolios four times a year, and maybe even more often, a number of financial news services are reporting.

Regular investors are currently entitled to know the specifics of their mutual fund’s holdings twice per year, but even then, the information is often long outdated. Mutual fund companies have argued that a switch to more frequent disclosure would reveal too much about the fund’s strategies, unfairly benefiting quick-moving short-term investors while harming long-term traders.

But with the charges against Bank of America, it has become obvious that Canary Capital, along with being allowed to trade after the market closed, was getting an inside look at the specifics of Bank of America’s portfolio, thus giving it an incalculable but substantial advantage.

"This is a case where, if they are going to do this on a case-by-case basis, then they should do this for everybody," FundAlarm.com publisher Roy Weitz told Reuters. He added that mutual fund companies "are not treating small investors the same as they are large investors."

Some firms have already begun to disclose fund details as frequently as once a month in the past few years, but often only the portfolio’s top holdings are revealed. Also, hedge funds, data-tracking companies and large institutional investors have often been allowed to see a portfolio’s contents provided they sign confidentiality agreements promising that they won’t disclose the information they are given. That information, though, is not as current as what Canary allegedly received.

Spitzer’s complaint contends that to make profit, Canary "first needed to determine the exact portfolio make-up of a target mutual fund. Mutual fund managers were happy to provide this information."

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