The fund industrys squeaky-clean image and avoidance of major scandals throughout its history may have taken a major hit Wednesday as
A number of fund firms have violated the law by allowing certain investors to buy a fund at that days closing price well into the evening hours, Spitzer told a press conference just up from Wall Street. In so doing, they shrugged their fiduciary responsibility to shareholders in order to line their own pockets, Spitzer said.
The attorney generals office is investigating
Spitzers office is now investigating the arrangements between Canary and mutual fund firms regarding market timing and late-day trading. "We have evidence of more widespread late-day trading than I would have ever suspected before we began this investigation, so I am startled that is the case," Spitzer said.
"Mutual funds, because of their nature and because of the laws that regulate them, have an overwhelming, direct, clear fiduciary duty to protect the interests of those who invest with them," Spitzer said. "Late-day trading is like being permitted to bet on yesterdays horse races. You know who is going to win and even after the race is over, youre permitted to place a bet that will guarantee you make money."
While Spitzer would not detail whether he expects to bring a monetary settlement with these firms and declined to characterize how widespread this problem, he did say that jail time is a possibility for those found of wrongdoing.
