SEC Issues Second Round of Fund Trade Requests

September 22, 2003, 1:00 a.m. EDT 1 Min Read

For the second time in six days, mutual fund companies received letters from the Securities and Exchange Commission last week inquiring how their funds are priced and traded.

Two inquiries, one on Sept. 11 and the latest on Sept. 5, are from Lori Richards, the SECs director of compliance inspections and examinations. She asked an undisclosed number of firms about illegal practices similar to the kind a former Bank of America broker has recently been criminally accused of by New York Attorney General Eliot Spitzer.

"We sent the letters and they have to do with late trading and valuation pracices," SEC spokesman John Heine told Reuters. The $7 trillion mutual fund industry has come under intense scrutiny of late, overshadowing years of perceived non-scandals.

"Many people know they have done nothing wrong, but when people start to inquire, they start to get very nervous," a mutual fund industry lawyer, speaking on the condition of anonymity, told Reuters. He added that the second blast of letters have caused great worry among smaller fund companies.

Prudential Securities confirmed that it had received one of the letters, although the SEC would not say which other firms got the correspondence. Lawyers and executives have said that companies holding international stock funds received letters. Firms will have one month to supply the information to the SEC.

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.