The Securities and Exchange Commission censured ABN Amro and Oechsle International Advisors on Friday in what the agency called its first major enforcement action related to a Wall Street practice known as "portfolio pumping."

Portfolio pumping, also known as window dressing, is when Wall Street money managers buy additional shares of stocks they already hold, near the end of a year or a fiscal quarter in an effort to improve a fund's performance.

The practice is believed to be common among money managers, and potentially misleads many of the millions of investors in mutual funds, hedge funds and private stock accounts.

Many investment funds are judged by how they perform in the calendar year or in each quarter, both by their customers and by various ratings firms, so it can be quite beneficial to inflate performance before a quarter's end. It can also increase the performance bonuses that make up much of a fund manager's pay.

A 1999 study by professors at the Wharton School at the University of Pennsylvania showed that stock mutual funds tend to outperform the Standard & Poor's 500-stock index on the last trading day of the year but greatly underperform the index on the first day of the following year, suggesting that after pumping occurs, the added shares are dumped on the market.

For fund investors, such practices can rack up hidden trading costs and lure investors into funds or privately managed stock accounts with head-turning short-term gains that might dissipate. For stock investors, such practices by professional managers can cause volatility, and seemingly inexplicable, short-term swings in share prices.

"This is the first pure portfolio pumping case that involves large company stocks and respectable institutions," said Gregory S. Bruch, an assistant director in the enforcement division of the SEC.

This story appeared on Financial Planning Interactive and was adapted from a story appearing in The New York Times.

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