Timing Abuses in Europe Rare, Regulators Discover
November 15, 2004
Market-timing and late-trading abuses are rare in the European fund industry, according to a recently published report from a group of regulators in Europe.
The Committee of European Securities Regulators (CESR), set out to examine whether the shady practices that have rocked the U.S. fund industry were prevalent in Europe's backyard, as well. "The report finds that abusive business practices, such as late trading and market timing, which exploit the mutual funds for the benefit of some privileged investors are rare in Europe," said Lamberto Cardia, CESR's expert group chairman.
The group looked at whether funds were at risk of market timing or late trading by examining the preventative controls the firms put in place on purchases and redemptions, as well as their consciousness of the threat. CESR also looked at how funds calculate their NAVs.
Despite the study showing that groups were not in cahoots with timers, it did find some shortcomings in the industry. Some shops maintained such poor records that it was impossible to verify the cut-off time for redemptions.
The group also found that European funds are at risk of timers because of lax controls.