SEC Requests Funds' Insider Information

September 29, 2004 ( - A "mini-sweep" of about 25 mutual fund companies is being conducted by the Boston office of the Securities and Exchange Commission (SEC) to uncover instances of improper trading by fund managers, traders, and other high-ranking insiders.

The Boston Globe reported that two SEC officials have confirmed that a letter was sent to fund groups this month requesting information. The list of 23 items requested included employee lists, policies on market timing, and minutes of meeting involving fund trustees. According to the Globe, the funds that received the request have one month to respond.

No fund company has openly admitted to receiving such a request from the SEC.

The existence of such a letter was first reported two weeks ago by the Compliance Standard, which asserted that it had received a copy of the letter. “It appears to be a final, thorough follow-up, which is very labor intensive, in terms of the funds producing the data and the SEC analyzing the data,” said Mark Goshko, a partner at Kirkpatrick & Lockhart in Boston who represents investment firms, to the Globe.

This sweep comes on top of another by the Boston office, in which the SEC is attempting to find instances in which retirement clients received kickbacks in return for investing in the fund, according to the Globe. The SEC has in the last year implemented a host of regulations meant to stop late trading and market timing in mutual funds. Multiple firms have been forced to settle with the SEC over illegal practices in late trading, as well as unfair practices regarding special market timing arrangements.