By Maxine Shapiro, KERA 90.1 business commentator
Dallas, TX – For some reason, I haven't talked much about mutual fund trading, and I'm worn out from even using the word "scandal." Not because it isn't scandalous, but because if the sacred mutual fund is scarred, where else do we put our money? I'm Maxine Shapiro with KERA Marketplace Midday.
As the probe widens into improper trading of mutual funds, investors are taking notice and stepping on the sidelines. According to AMG Data Services, there's been a significant drop in money flowing into stock mutual funds. For August, the average weekly inflow was $4.9 billion. By the end of September, a surprisingly bullish month, the inflow fell by half to $2.2 billion. And the president of AMG Data, accounting for the sharp decline, told AP investors are concerned about the mutual fund investigation.
Now some say you can't compare the way investors lost life savings in scandals like WorldCom or Enron to the revelation of the unscrupulous way some mutual funds were being traded. But New York Attorney General Eliot Spitzer, the fearless crusader for the stock investor, could care less about the degree of wrongful trading. Unethical and unlawful is unethical and unlawful - period.
Earlier this week, AP gave a synopsis of what's transpired over the last few weeks. Merrill Lynch, Alliance Capital Management Holding, Prudential Securities and Fred Alger Management have suspended or fired nearly two-dozen employees believed to have engaged in illegal trading. And today, a former Alger official will probably plead guilty to charges of obstructing an investigation of improper mutual fund trading practices.
Back in early September, Spitzer accused hedge fund Canary Capital Partners of illegal trading with Bank of America, Janus, Bank One and Strong Financial funds. And Bank of America has set up a restitution fund for investors who lost money.
So, is it the worst scandal ever? Not by a long shot. Does it stink? You know it! For KERA Marketplace Midday, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m.
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