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Late Trading

Oct. 12, 2005

Late Trading

Late trading refers to the practice of placing orders to buy or redeem mutual fund shares after the time as of which a mutual fund has calculated its net asset value (NAV), usually as of the close of trading at 4:00 p.m. Eastern Time, but receiving the price based on the prior NAV already determined as of that day. Late trading violates the federal securities laws concerning the price at which mutual fund shares must be bought or redeemed and defrauds innocent investors in those mutual funds by giving to the late trader an advantage not available to other investors. In particular, the late trader obtains an advantage – at the expense of the other shareholders of the mutual fund – when he learns of market moving information and is able to purchase or redeem mutual fund shares at prices set before the market moving information was released.

To search for recent SEC enforcement actions involving late trading, click here.

We have provided this information as a service to investors.  It is neither a legal interpretation nor a statement of SEC policy.  If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.

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