Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Targeting Mutual Funds

By Michael Kendall and David Rosenbloom
October 01, 2003

In last month's article, we pointed out that successful enforcement efforts against investment banks have emboldened state and federal authorities to target mutual funds – a fact that has been borne out in the national press over the past few weeks. More precisely, the funds' investment advisers are the targets. We believe regulators' inquiries will most likely examine two general categories, fund administration and marketing. Last month's article discussed fund administration; the following concentrates on trade allocations, and advertising and marketing.

Trade Allocations

Trade allocation issues arise when funds conduct bunched trades. For example, an adviser might conduct trades that benefit more than one fund and intentionally delay apportioning the shares. This delay allows the adviser to allocate trades to favored funds based upon subsequent market movements (this scheme is commonly called “cherry picking”). A fund may also manipulate the pricing of bunched trades by allocating the shares without using the average price paid, thereby allotting a more favorable price to favored funds. Compliance advisers should educate fund managers to these risks, and ensure that fund managers have a truthful, ethical, coherent explanation for their trade allocations that is consistent with the documents. Managers should have this explanation in mind before they allocate trades, not grasp for one after the fact, once the subpoena has arrived.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Legal Possession: What Does It Mean? Image

Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.

The Anti-Assignment Override Provisions Image

UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?