SEC Turns Gaze To Fund Managers' Personal Accounts

December 30, 2003 ( - The US Securities and Exchange Commission (SEC) has touched off an investigation into the personal trading records of the nation's mutual fund managers to see if they have engaged in improper trading in their personal inventories.

To conduct the search, the SEC is requestingpersonal trading information for “access” individuals – fund staffers with access to insider information about a fund’s holdings – from all the mutual funds it is investigating as part of its ongoing late-trading and market-timing investigation.   Further the agency plans on making such trading record check part of it routine examinations, according a New York Post report.

Such a move is a departure from the SEC’s previous practice of simply looking at a manager’s personal records for stocks and bond deals.   Previously, the SEC required portfolio managers to report stock and bond transactions on a quarterly basis to the fund’s compliance department, which would look at brokerage records to make sure the reports matched – and that the managers were not front-running the stocks they traded in.

Fund managers have not been left out of the fray that has ensued after the federal and state investigators touched off their broad improper mutual fund trading probe earlier this year (See  Spitzer Fund Abuse Probe Pumps Out More Subpoenas).   The SEC and New York Attorney General Eliot Spitzer have charged two former Putnam Investments managing directors, the CEO of Invesco Funds and two Prudential brokers for trading or arranging trading in the funds they managed (See Prosecutors: Invesco Engaged in Massive Market Timing Scheme ).