MUTUAL FUND OFFENSES
Selective Disclosure ...
Selective disclosure of portfolio holdings is an offense that often occurs in conjunction with market timing and late trading. After all, unless the holdings of the fund are known to those involved in market timing and late trading, how can a profit be made with certainty? Knowledge of what stocks are in the portfolio and may be subject to stale pricing is vital to market timing as is such knowledge to late trading schemes based on profiting from rapid movement in the price of certain stocks after the 4:00 p.m. U.S. market close. As is the case with market timing, disclosure of portfolio holdings is not unlawful and indeed benefits the careful investor, who must know holdings in his funds to maintain proper diversity. The offense lies in selective disclosure, which is often made to those same organizations allowed to benefit from market timing and late trading.
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