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| 2003
News and Press Releases |
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HEADLINE:
US Market Timing Abuses Seen As Systemic
By: Simon Targett
FinancialTimes.com. November 23, 2003
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EXCERPT: A majority of executives running pension schemes in the US think that the market timing abuses uncovered by regulators are "systemic", according to a report by Greenwich Associates. In a survey of 131 funds, some 60 per cent said that improper trading - which is the subject of a major investigation by Eliot Spitzer, New York state attorney general - was systemic to the US mutual fund industry. But for those funds with money managed by firms under investigation - 76 were surveyed - some 71 per cent considered the problem to be widespread across the industry. John Webster, managing director of Greenwich Associates, said: "When the problem surfaced, the prevailing view was that there were a few bad apples. But that's not how it's viewed any more." Mr Webster added that: "People are very angry, and they want to see companies clean up their act." Some 54 per cent of funds viewed the problem as "very serious. About two-thirds of them had discussed the issue with their investment consultant, investment committee or board of trustees. Some 47 per cent of funds that do not use one of the firms under investigation said the market timing problem was systemic. Overall, some 30 per cent said they were uncertain about the wider impact of improper trading. In a series of follow-up interviews, Greenwich Associates found funds that were ready to express their dissatisfaction "in no uncertain terms". Fund executives wanted mutual fund firms to be "up-front, conduct independent and external audits, clearly communicate the problems, and show resolutions to ensure that violations do not occur in the future". They also wanted tough action over individuals caught engaging in improper trading. One fund executive, quoted anonymously in the report, said: "Issue a zero tolerance policy for inappropriate behaviour. Include in compensation contracts a provision that negates any bonus or other [money] if they break the rules. Hit them in their wallets and make it hurt." Others said the top executives should take responsibility. One was quoted as saying: "Change top management, and terminate managers where they have been proven to have engaged in inappropriate behaviour."
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