One of the best winning strategy

Discussion in 'Strategy Development' started by OddTrader, Oct 27, 2006.

  1. One of the best winning strategy

    "Market Timing"

    WASHINGTON, Oct 26 (Reuters) - The former chief executive of the PIMCO equity mutual funds agreed to pay $572,000 to settle charges that he gave a hedge fund special trading privileges, U.S. regulators said on Thursday.

    Stephen Treadway, who was CEO of several PIMCO entities including PIMCO Advisors Fund Management LLC, was found liable in a federal civil court case in June for securities fraud, the U.S. Securities and Exchange Commission said.

    An attorney for Treadway declined to comment on the settlement.

    Treadway approved an arrangement in January 2002 to allow hedge fund Canary Capital Partners LLC to use market timing with certain PIMCO funds "despite knowing that the disclosures in the funds' prospectus represented to investors that the funds discouraged and restricted market timing," the SEC said.

    From February 2002 to April 2003, Canary engaged in more than 100 round-trip transactions involving some $4 billion in PIMCO funds as part of the market timing arrangement that Treadway approved, the SEC said in a statement.

    Market timing, done primarily by hedge funds and sometimes in tandem with mutual fund managers, has been at the center of mutual fund scandals for several years.

    In the practice, the average long-term mutual fund investor is cheated out of profits by professional traders who buy and sell fund shares rapidly to exploit pricing inefficiencies.

    Treadway did not disclose his knowledge of the deal until approximately September 2003, when "Canary's trading activities were being investigated by government authorities," according to the SEC.

    Market timing is illegal in cases where a fund publicly forbids it and selected investors are permitted to engage in the practice without full disclosure.

    Canary Capital, a hedge fund run by financier Edward Stern, helped spark an industry-wide probe by federal and state regulators into improper trading in mutual fund shares.

  2. ronblack


    Is the above statement necessarily true? Could someone explain why making a market efficient by exploiting inefficiencies is labeled by the authorities an illegal practice?