Securities Fraud Lawyer

Has the value of your Mutual Fund investment been diluted?

The mutual fund industry began back in the 1920s. Mutual funds were always considered a way for America's small investors to have a relatively safe way of investing their money. Mutual funds were always sold as a limited risk investment- in other words, safe. But that perception has changed dramatically of late- as many of the leading mutual fund families are under investigation for allegedly participating in schemes which resulted in a dilution of the value of the funds to the detriment of long-term mutual fund shareholders. Among the mutual fund families which are currently under investigation (or being sued) are these: Janus Funds; Bank of America's Nations Funds; Alliance Capitol/Alliance Bernstein; One Group Funds; Charles Schwab; Strong Funds; Massachusetts Financial Services; Pilgrim Baxter; and Putnam Investments.

What exactly does it mean when it says that there was a dilution of the value of the funds? According to the October 20, 2003 Wall Street Journal, "Dilution is a complex and unfamiliar term to most investors, but it boils down to a simple notion- the profits made by short-term traders of mutual funds is often money lost by long-term shareholders."

Mutual fund companies state in their prospectuses that they prohibit "late trading" and "short-term trading" by large investors. However, government investigators have determined that numerous mutual fund managers have allowed both practices to occur, often in exchange for cash payments and other inducements.

Late trading involves the purchase of mutual fund shares at the 4 p.m. price after the market closes. It is illegal. According to New York State Attorney General Elliot Spritzer, "late trading is like allowing someone to bet on a horse race after all the horses have crossed the finish line."

Short-term trading, or market timing, is an investment scheme involving the "in and out" trading of mutual funds, on a short-term basis. This is a scheme which involves timing- and is used as a way to exploit market inefficiencies when the NAV (net asset value) price of mutual fund shares does not reflect the current market value of the stocks held by the mutual fund.

In many cases, mutual fund managers knew that the values posted for overseas funds did not reflect the up-to-the-minute values. And that opened the way for them to profit at the expense of ordinary fund investors.

The mutual fund industry used to boast of being scandal-free. As you can plainly see, that is no longer the case.

If you think you have been the victim of securities fraud, or your mutual fund investment has been diluted, contact a qualified attorney at HugeSettlements.com

Please Note:
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