Street.Com – Money manager Waddell & Reed (WDR – news – Cramer’s Take) will pay a $50million penalty to securities regulators to settle claims arising from the nearly 3-year-old investigation into abusive mutual fund trading.
The Kansas-based financial firm said Monday it had reached a settlement with both state regulators and the Securities and Exchange Commission. The penalty stems from allegations that Waddell & Reed permitted hedge funds and other traders to market time some of its mutual funds.
Market timing is a trading arbitrage that involves frequently buying and selling mutual fund shares and playing them against the shares the fund owns. It’s often harmful to long-term fund investors because it drives up the costs of operating the funds.
Over the past three years, regulators investigating abusive mutual fund trading have collected more than $3 billion in fines from mutual fund companies, brokerages and hedge funds.
