[A-List] UK pensions crisis: market timing comes to London

["Michael Keaney" <michael.keaney@xxxxxx>]

FSA to act as market timing scandal hits City
SIMON BAIN
The Herald, December 08 2003

THE chief executives of 20 leading fund managers will be summoned to the
headquarters of the Financial Services Authority on Wednesday as the "market
timing" scandal finally reaches the City of London.

The FSA has decided to act, three months after New York attorney-general
Eliot Spitzer first blew the whistle on market-timing when he announced a
$40m (£24m) settlement with US hedge fund Canary Capital Partners, which had
traded in and out of mutual funds, exploiting time and price differences to
the detriment of small investors.

At that time Scottish fund managers contacted by The Herald insisted that
London compliance rules meant there was no likelihood of any irregular
trading being uncovered involving UK funds.

Last week Standard Life Investments revealed that it had been forced to stop
market timing activity by "an American hedge fund" in one of its large
Edinburgh-based unit trusts.

Keith Skeoch, chief investment officer, said Standard had been approached by
hedge funds asking if they could use timing strategies, and had said no
because "it breaches the spirit of the rules". The funds were attempting to
duck in and out to arbitrage price differences in international markets.

However, Skeoch said: "It does not breach British rules."

Scottish Widows Investment Partnership said yesterday that it was "sometimes
approached by institutional investors looking to place large investments (or
a series of investments) in our Oeics".

Neil Cameron, spokesman for SWIP, said: "We transact this business in
accordance with the terms and restrictions of the scheme documentation and
the FSA rules.

"As a matter of course, all new and existing business is reviewed and
Scottish Widows will take any necessary steps to protect the interests of
the fund and other shareholders if required. As a responsible fund manager,
we operate within the terms of the scheme and focus our efforts in
attracting high-quality, long-term investment business into Scottish Widows
funds."

Yesterday other UK managers were reported to have been approached by
"traders they quickly recognised as market-timers", and to have turned them
away.
One of the managers reported to have been approached was Invesco, part of
the Anglo-American and UK-listed Amvescap group which last week became the
latest group embroiled in the scandal. Invesco in London said it had
"severed ties as soon as it had noticed the activity".

So far in the US, 15 US mutual funds, 12 brokerages, four banks and dozens
of individuals have been "outed" in the clean-up.