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07 November 2003

FEFSI closely following developments in Europe over market timing

In the weeks following the Securities and Exchange Commission (SEC) and Attorney General Spitzer’s revelations in the USA, FEFSI started an exchange of information among its member associations to ascertain what rules and practices existed in the various European countries regarding market timing.

The European investment fund industry is well aware of the problem of market timing and late trading. As in Europe the regulatory traditions and practices are not uniform it is difficult to identify a single solution to the issue.

FEFSI offers a variety of solutions such as:

  • forward pricing, as a widely accepted practice in Europe, ensuring that acquisition and redemption orders are not accepted after the time at which fund units/shares are priced.
  • In addition, measures are taken by fund managers to ensure that fund share prices are based on fair valuations of the securities their funds hold.
  • Furthermore, it is reported that fund managers monitor subscriptions and redemptions to detect trading activities that could harm long-term investors.

    To date, there is no evidence that systematic market timing or late trading activities have occurred in the European investment fund industry.

    Notwithstanding this reassuring first indication and independently of the above findings, FEFSI has been endeavouring to establish High Level Principles of Integrity for the fund industry, and of course trading practices will be given due attention in the course of this exercise aimed at continuously raising industry standards. It is encouraging that many national fund industries have over the last years made on-going efforts to bolster their self-regulatory framework.

    Press release


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