Mutual Fund Scandal

The first verdict in the market-timing scandal has come in with an acquittal on 27 accounts and a mistrial on the remaining four (the jury was deadlocked at 11-1 to acquit). The broker had been accused of helping a hedge fund, Canary Capital Partners, place trades to buy mutual fund shares after the 4:00 PM cutoff and still get the pre-cutoff price.

This is the first of NY Attorney General Eliot Spitzer’s cases to go to a jury. If he brought his strongest case first, this is not good news for the ambitious Spitzer.

More background information on the mutual fund scandal can be found here and here.

As a rule of thumb, if you were already a smart investor, you probably had little or nothing to worry about. Every one of the funds involved in the scandals was sold through intermediaries (brokers, financial planners, etc.) for fees or commissions. Not one of the no-load funds was involved at all, and these usually have lower fees. The largest no-load fund families include Vanguard, Fidelity, and T. Rowe Price. Investing on your own means doing your own research, but if you work alone, you can be sure there is no conflict of interest. Or as a great merchant puts it, “Suffer a little, save a lot.”

2 thoughts on “Mutual Fund Scandal”

  1. Good. I’m glad the broker fought it and I’m glad he was acquitted on so many counts. I hope that he will be acquitted on the remaining counts too. Spitzer is an amoral parasite who seeks professional gain by destroying politically-unpopular people. The world will be better off if he gets his political comeuppance sooner rather than later and goes off to chase ambulances or whatever retired parasites do in our society. Of course he may still be elected NY Governor but today’s loss doesn’t help his chances.

  2. Of course he may still be elected NY Governor but today’s loss doesn’t help his chances.
    I disagree. Spitzer doesn’t need to win cases to gain political capital in NY. And losing cases (unless he lost them all) is unlikely to even register with the public consciousness.

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