Morningstar has recommended that investors dump shares of 11 PBHG funds after its founders were charged with securities fraud for allowing two of the firm's clients to trade billions of dollars in and out of its funds.

In the latest instance of gross misconduct by fund executives, the Philadelphia-based fund shop and founders Gary Pilgrim and Harold Baxter are accused of allowing hedge fund Appalachian Trails to market time three of its funds from 1998 to at least 2001, according to charges filed by the Securities and Exchange Commission and New York Attorney General Eliot Spitzer.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.