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How To Compensate Mutual Fund Investors For Late Trading And Market Timing, Richard A. Booth Marbury Research Professor Of Law

Faculty Scholarship

This article focuses on the mutual fund trading scandals that came to light in late 2003 and in particular on the remedy that should be available to injured mutual fund investors. First, I describe mutual fund structure and the trading process for mutual fund shares. Second, I show how late trading and market timing can extract value from a fund and harm the interests of non-trading fund investors. Third, I discuss the factors that gave rise to these abuses and regulatory changes that would prevent a recurrence. Finally, I address the issues raised by the numerous private stockholder actions prompted …

The Mysterious Ways Of Mutual Funds: Market Timing, Tamar Frankel

Faculty Scholarship

The term market timing was little known outside the arcane world of mutual funds until state attorneys general from across the country popularized it. The term's innocuous-sounding ring assumed a more pernicious note when the mysterious ways of mutual funds became more transparent. In its pernicious sense, market timing denominates mutual fund insiders using the inscrutable structures of mutual funds to provide benefits selectively to favored participants at the expense of less favored participants.

Mutual fund shares are not like common stocks; investments made using these vehicles are unlike those made through traditional securities markets. While the peculiar features of …