because of the delay in the close of overseas markets and those in the U.S. Market timing itself is not illegal. But some mutual funds stated in their prospectus that they did not allow such trading, but secretly allowed it anyway for certain investors.

The news of scandal has recently rocked the $7 trillion mutual fund industry. If you own a mutual fund, are wondering how this might affect you and what action you should take, read on.

Many of the recent charges relate to a practice known as late trading. Mutual fund orders have to be placed by 4 p.m. Eastern time in order to receive that day’s closing price. If an order is received after the cut-off, it can’t be processed until the following day.

But with late trading, selected orders received after the cut-off are still given same-day status. Some mutual fund companies allowed a select few to do this and then went to great lengths to cover up these trades. This is clearly illegal and those involved should be severely punished.

Market timing is another practice being scrutinized. Traders buy and sell mutual fund shares based on small changes in the prices of a fund’s underlying stocks that aren’t currently reflected in the fund’s share price. This is most often done with international stock mutual funds, because of the delay in the close of overseas markets and those in the U.S. Market timing itself is not illegal. But some mutual funds stated in their prospectus that they did not allow such trading, but secretly allowed it anyway for certain investors.

g. Mutual fund orders have to be placed by 4 p.m. Eastern time in order to receive that day’s closing price. If an order is received after the cut-off, it can’t be processed until the following day.

But with late trading, selected orders received after the cut-off are still given same-day status. Some mutual fund companies allowed a select few to do this and then went to great lengths to cover up these trades. This is clearly illegal and those involved should be severely punished.

Market timing is another practice being scrutinized. Traders buy and sell mutual fund shares based on small changes in the prices of a fund’s underlying stocks that aren’t currently reflected in the fund’s share price. This is most often done with international stock mutual funds, because of the delay in the close of overseas markets and those in the U.S. Market timing itself is not illegal. But some mutual funds stated in their prospectus that they did not allow such trading, but secretly allowed it anyway for certain investors.

he cut-off are still given same-day status. Some mutual fund companies allowed a select few to do this and then went to great lengths to cover up these trades. This is clearly illegal and those involved should be severely punished.

Market timing is another practice being scrutinized. Traders buy and sell mutual fund shares based on small changes in the prices of a fund’s underlying stocks that aren’t currently reflected in the fund’s share price. This is most often done with international stock mutual funds, because of the delay in the close of overseas markets and those in the U.S. Market timing itself is not illegal. But some mutual funds stated in their prospectus that they did not allow such trading, but secretly allowed it anyway for certain investors.

er practice being scrutinized. Traders buy and sell mutual fund shares based on small changes in the prices of a fund’s underlying stocks that aren’t currently reflected in the fund’s share price. This is most often done with international stock mutual funds, because of the delay in the close of overseas markets and those in the U.S. Market timing itself is not illegal. But some mutual funds stated in their prospectus that they did not allow such trading, but secretly allowed it anyway for certain investors.

because of the delay in the close of overseas markets and those in the U.S. Market timing itself is not illegal. But some mutual funds stated in their prospectus that they did not allow such trading, but secretly allowed it anyway for certain investors.

The effect of both of these practices is that they allowed a privileged few to profit while in effect lowering the overall returns for the large number of smaller, longer term investors. The willful deception of shareholders by the fund management is inexcusable.

It’s important to keep these charges in perspective. First, the underlying value of the stocks in these mutual funds has not been affected. This isn’t like Enron where you could see your investment drop 80% simply because of the scandal. Second, the market timing charges are mostly limited to international funds. Third, so far only a few fund companies are affected. And last, mutual funds in general still remain an excellent investment vehicle.

What should you do if you are in one of the mutual funds named in this scandal? You might want to consider getting out of that fund and that fund company altogether. But getting out might be difficult if you face a stiff penalty or recently paid a big commission when you purchased it.

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