Schwab finds improper fund trades
By Luisa Beltran, CBS.MarketWatch.com
Last Update: 11:41 AM ET Nov. 14, 2003
NEW YORK (CBS.MW) -- Charles Schwab revealed Friday that it has uncovered instances of improper mutual fund trading, becoming the first discount brokerage implicated in the fund industry's ever-widening scandal.
The nation's largest discount broker also said that it is the subject of a review by the Securities and Exchange Commission and that the company has received a subpoena from New York Attorney General Eliot Spitzer.
In a regulatory filing with the SEC, San Francisco-based Schwab said it's investigating incidents in which a "small number of parties were permitted to engage in short-term trading of U.S. Trust's Excelsior Funds." Schwab is also looking at "limited number" of instances at the company in which fund orders may have been entered or processed after the stock market's closing time at 4 p.m., which is a violation of Schwab policies.
Schwab (SCH: news, chart, profile) said it is cooperating with regulators and is conducting its own review of fund trading, distribution and servicing practices at or through affiliates.
Calls to Schwab were not immediately returned.
In late morning trading, shares of Schwab fell 67 cents or 5 percent to $12.65.
Another inquiry
Separately, Blackrock late Thursday said it also received subpoenas from Spitzer and William Galvin, Massachusetts Secretary of the Commonwealth. Blackrock also has received requests from the SEC in connection with the "industry-wide investigations of practices regarding market timing, late trading and employee trading in mutual funds," according to the a regulatory filing.
New York-based Blackrock, which manages over $30 billion in mutual funds, said it is cooperating in all the matters.
With the announcement of trading improprieties, Schwab becomes the first retail broker drawn into the widening mutual fund probes launched in September by Eliot Spitzer, New York's attorney general.
Since then, state and federal regulators have begun investigating a wide range of other companies for instances of improper funds trading.
On Thursday, the founders of Pilgrim Baxter & Associates stepped down after an internal probe revealed questionable mutual fund practices at the firm. Spitzer is considering filing criminal charges, a person familiar with the situation has told CBS MarketWatch. See full story.
Luisa Beltran is a reporter for CBS.MarketWatch.com in New York. |
