The SEC is going to be paying closer attention to abnormal buying and selling in mutual funds, The Wall Street Journal reports. Cash flow is one area that will get heightened scrutiny.

"If you look at fund flows in and out, you can identify funds that are susceptible to market timing and late trading," Paul Roye, director of the division of investment management at the SEC, told The Journal. "That data can help us target firms for inspection."

If the SEC had paid attention to the abnormally high flows at Alliance Capital Management, for instance, The Journal says, it might have caught the market timing going on there. Alliance’s technology fund, which was market timed, averaged $1.5 billion in assets in 2002 – but saw $12 billion move in and out of the fund that year.

"When you see funds with a lot [of] heavy [cash] flows in and out, it tells you something," says Eric Zitzewitz, a business professor with Stanford University, who is advising the SEC on what to look for in flows statistics.


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.

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