Funds Probe - 'Significant....Criminal Cases' Likely

The New York Times reports that, one day not too long ago, an unidentified executive who 'had been in a very senior position .....on Wall Street' came into New York State Attorney General Eliot Spitzer's office and blew the whistle on mutual fund trading practices, with stories of illegal and unethical goings-on.

Sceptical at first, Spitzer and his team soon became converts and have been zealous in their investigations. The New York State Attorney General is quoted by the newspaper, saying in an interview last week: 'The tentacles of this are reaching into places that are shocking and surprising. The number of broker-dealers and trust companies and similar types of intermediaries that have popped up on our radar screen in the past few weeks is astonishing........There will be a significant number of criminal cases in each of those venues'.

And the fallout thus-far has not just been confined to the hedge fund industry. Already we have seen giants like Alliance Capital, Bank of America, Merrill Lynch and Prudential under the microscope. As The New York Times says, William Donaldson, chairman of US regulator the Securities and Exchange Commission, has now confirmed that his agency is to look at establishing tighter rules designed to prevent 'illegal late trades and abusive market-timing activities'. Looks like we can expect more federal probes, more prosecutions, more investor lawsuits and increased regulation as a result of the affair. In other words, business as usual for Spitzer and Wall Street.

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