Scudder Confesses Market Timing Instance

January 13, 2004 ( - The roster of companies getting entangled in the ongoing mutual fund trading scandal got a bit longer with word that Scudder Investments says one of its clients may have market timed some of its international mutual funds.

In regulatory filings with the US Securities and Exchange Commission (SEC), Scudder said it had “identified an investment advisory firm that had an arrangement with the organization that resulted in frequent trading, including trading in your fund, inconsistent with registration policies,” Reuters reported.

Scudder included the admission in prospectus supplements for various share classes of the Scudder European Equity, International Equity and International Select Equity funds. Scudder said the trading arrangement was up and running before the funds’ current managers took over in 2002 and that it ended the setup in early 2003.

The firm said it is looking into whether the trading hurt other shareholders and will work with the funds’ directors to pay back shareholders for losses and that it continues to cooperate with regulators.

In a separate statement, Deutsche Asset Management said: “As part of a review that is not yet complete, Scudder has identified an arrangement with an outside investment advisory firm that traded frequently in a small number of funds … We have provided the preliminary results of this review to the appropriate regulators and the fund boards.”   Scudder is Deutsche Bank AG’s US retail brand.

More than 20 fund companies have said they either have disciplined employees, are conducting internal reviews or are under investigation for possible improper fund trading. State and federal regulators are staging a wide-ranging mutual fund industry probe focusing on market timing, late trading and fund sales abuses.