NY cracks down on Illegal Mutual Fund practices
Today, the New York Attorney General announced investigations of four mutual fund companies that are alleged to be favoring certain clients and/or trading violations.
This comes while Congress and SEC are also investigating violations by mutual fund companies.
Many of the violations focus on after hours trading which is illegal for mutual fund companies. This is because net asset value per share for mutual funds is determined at end of market close. So, some fund companies are allegedly buying and selling securities after hours and pocketing the profits or hiding the losses.
It seems a little unusual that during the market boom in 90′s to 2000 leading up to stock market bubble we saw hardly any investigations and now we are seeing all sorts of investigations.
During frenzies and periods of optimism, people rarely ask questions or are skeptical of wrongdoings or underlying fundamentals. However, after the bubble bursts, people become alot more skeptical and ask more questions about practices.
It seems a bit unusual that during a period of record unemployment in US and record deficits that government can afford these investigations. These are welcome, but at what cost. If government finds that violations are wide ranging, the stock market could take a major dive.
But, maybe it is lack of trust that leads us up to the investigations. From the stock market bubble in 2000 to recent scandals such as Global Crossings, Tyco, Enron, and MCI Worldcom. Add this to other events such as California energy & government, Sep 11, shoe bomber, anthrax scares, war in Iraq and sniper shootings. In addition, recent energy outage in New England area makes people a little less trusting of others.
Perhaps this decade will become known as the litigation period in american history. Only time will tell.
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