MUTUAL FUND OFFENSES
Other Mutual Fund Abuses ...
Abuses in the area of market timing and late trading only scratch the surface of abuses that have been encountered among U.S. funds and their managers. At least six other areas of abuse or alleged abuse in the U.S. mutual fund industry have come to light.
- Managers trading in their own accounts with inside information on the holding of their funds.
- Managers “front running” their own funds, i.e., buying or selling before their own funds bought or sold.
- Fund companies using “soft dollars” to transfer value out of their own mutual funds in other areas of their business.
- Fund companies charging retail customers higher management fees than institutional customers for managing the same portfolio.
- Brokers overcharging customers in connection with broker purchases of mutual funds.
- Brokerage firms giving incentives such as larger commissions or bonuses to their brokers to push customers into certain funds including their own offerings.
In contemplating these eight categories of fraud and investor abuse it is important to keep in mind that most mutual funds have not engaged in improprieties and that the industry has had an enviable record in avoiding such fraud and abuse over the years.
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