Illegal Stock Trading Widespread and Costly, Says Prof

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The alleged illegal trading that prosecutors are investigating at a few mutual fund firms might be more widespread and costly to investors than thought, reports USA Today.

Illegal trading occurs in at least one out of every six mutual fund families and costs investors about $400 million a year, according to an academic study released Thursday.

The practice of “late trading” is so rife that individual shareholders lose about a nickel for every $100 invested in international funds, and over half a penny in domestic funds, according to the findings by Stanford University professor Eric Zitzewitz. The news is certain to bolster New York Attorney General Eliot Spitzer’s claims that the mutual fund industry is rigged against small investors, the paper said.


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