San Diego Union Tribune – UBS Financial Services Inc. was fined $49.5 million Thursday by the New York Stock Exchange and state regulators in New Jersey for improperly trading mutual funds on behalf of hedge funds and other clients.
According to NYSE Regulation, brokers in at least seven UBS branch offices allegedly used deceptive trading practices on behalf of clients so they could trade shares of mutual funds ahead of the close of stock trading – a practice called market-timing. From 2000 through 2002, UBS brokers used multiple identities, computer codes and other methods to mask wholesale selling of fund shares.
Regulators and the mutual fund industry have been cracking down on market-timing, a practice in which investors sell shares in funds just before or after the close of trading when it’s likely that those shares would lose value. The value of mutual fund shares is recalculated once daily, after the close of trading, and market-timing takes advantage of the time between the market’s close and that recalculation to sell fund shares and prevent losses, which are absorbed by the fund company and, ultimately, the company’s fund investors.
