SEC Enforcement Director Speaks On Mutual Fund Probe

by Glen Shapiro, LawAndTax-News.com, New York

28 October 2003

Speaking in a recent television interview, director of enforcement at the US Securities and Exchange Commission (SEC), Stephen Cutler revealed that the regulator has discovered more disturbing news as a result of its probe into the investment practices of mutual funds and hedge funds.

"We're finding evidence that people associated with mutual funds are timing their own funds - executives with fund companies and portfolio managers with fund companies - and there's just no excuse for that," he told CNBC, adding that:

"Those people will be charged appropriately in enforcement actions where we do find that evidence. It's disgraceful, really."

In its search for wrongdoing within the mutual fund community, the SEC has been primarily focusing on the semi-legal practice of market timing, and the illegal technique of late trading. Its probe is running in parallel with that of New York attorney general, Eliot Spitzer, who recently reached a $40 million settlement with the Canary Capital LLC hedge fund over the use of such practices.

Cutler went on to explain that the SEC has acted "against hedge fund people, against mutual fund people and against the intermediaries, the brokers. I'm afraid to say that the conduct touches each of those areas and this isn't just a couple of bad apples."

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