Mutal Funds
...are executed at that price. The late trading will allow the investors to get the 4pm price after four ensuring a gain if he quickly sells the next day. That is why this practice is outlawed. After hours trading is watched very closely by the Securities trade commission. Most of the after hours trading is uncovered and there are thousands of cases due to this each year. With about 95 million people invested in mutual funds there is plenty of money to play with (about 7 trillion). Part of the reason for this large involvement is due to that it’s only required that you put down $500-$1000 to start; this allows almost all people to be able to start a mutual fund. Not all of the fraud in mutual funds is due to after hours trading. Some of it involves the fund managers giving red carpet treatment to the wealthy at the expense of the ordinary investor by way of market timing. This in and out investing known as market timing which is not illegal but it does hurt the long term investors. It racks up fees and also allows the wealthy people to make even more money. Most of the short term trading is done through international funds because it is often that if the U.S market rises today than the foreign market will rise tomorrow. A person can buy shares in a foreign market close to closing time to ensure the market closed with gains. By noon the next day the foreign markets close and it can be seen if they went up or down. At this time the shares will be sold. At 4pm they will be able to see if they were right or not. Most fund groups have put restrictions on this or rules to get rid of it completely because they believe that the practice in unethical. Even with the restrictions market timing still goes on. Many of the mutual fund companies are involved in some type of fraud. Last year there were four large companies that suffered huge losses that were due to fraudulent acts committed by there brokers. Some of the fraud that takes place is the churning of mutual funds; brokers try to convince the investors to change between mutual funds within the same company because the ones that they are...