Word: scandalizer
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...depth of the scandal started to become clear with the alarming testimony of Stephen Cutler, enforcement director of the Securities and Exchange Commission, who spoke at hearings before the Senate last week. The SEC has so far examined records from 88 of the largest mutual funds in the country, looking for evidence of market timing--rapid, short-term trading that most mutual funds try to discourage because it drives up costs for other investors--and late trading, the illegal practice of allowing investors to trade after hours using outdated prices...
...preliminary review, the agency found that 50% of the funds had made special arrangements for market timing, 30% helped market timers cover their tracks, 10% reported possible late-trading situations and three funds actually approved late trading. The scandal has so far implicated 11 prominent funds and 10 fund executives and brokers. Putnam Investments, a Boston firm embroiled in the scandal, lost $8.4 billion in assets pulled out since Oct. 29 by spooked investors and state pension funds. "We are disappointed by their decision and hope that we'll be able to manage their funds in the future," a Putnam...
...couple of months ago, few expected to see the words "mutual funds" in a corporate-scandal headline. Even Spitzer, who spent most of last year wrestling with Wall Street's biggest investment banks, did not suspect that there was anything amiss in the funds industry until he began investigating it this summer. "Most people had accepted that the mutual-fund industry was reasonably free of these sorts of problems," he says. That reputation is partly what has driven mutual funds' tremendous growth since they were established in their current form in 1940 as a way for the average investor...
...regulate that? For one thing, as with last year's corporate accounting scandals, boards of directors will get closer scrutiny. Congress is considering a bill that would tighten board oversight of mutual-fund managers and increase the number of independent directors, including the chairman. Spitzer says that an alert board of directors can easily detect market timing using public information about the fund's trading volume, and would never allow fund executives to trade their own funds against the interest of shareholders, as the chairman of Strong Funds is accused of doing. (Richard Strong has said he will reimburse...
...year of the business scandal, this is the year many have gone to trial. President Bush's point man on corporate fraud, Bill Mateja, says that with 316 open cases, more indictments are coming. Here's where the big cases stand...