In the wake of 2003's spate of late trading and market timing scandals, the Vanguard Group announced recently that it will be moving to prevent frequent in-and-out trades from taking place in the majority of its fund offerings.
From September 30, the company announced, investors will not be permitted to purchase Vanguard fund shares by phone or over the internet within 60 days of selling shares in the same fund.
However, money-market funds, short-term bond funds, and VIPER exchange traded funds (ETFs) will be exempted from this restriction, as will asset transfers, check-writing redemptions, mailed transactions, and some types of automatic transaction.
The firm explained that the changes were necessary because:
"Frequent trading by individual shareholders generally results in higher transaction costs for shareholders overall, and may also interfere with an adviser's ability to manage the fund."
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