Article looks at several aspects of the issue. Goes beyond the issue of legality.
On one point I have a bit of a different take. The author suggests that every exchnge in / out of a fund costs the firm and its
stay-put investors money. But, if 500 investors
sell shares of a fund today and 500 others
buy shares in the same fund today (assuming the in / out dollar totals are roughly equal), than the cost to the firm and its shareholders is minimal. Yes - there’s back room expenses (staffing, record keeping, postage to to mail confirmations). But the actual costs of buying and selling securities in the open market should be negligible. I’ve often wondered, too, whether when T. Rowe’s shareholders sell a fund, if the stock shares the fund must “sell” to meet the redemption can’t simply be transferred to another Price fund that might be seeing inflows or is otherwise in need of those shares?
Price blocks repurchase of a fund by an investor who has sold the same fund within 30 days. (Doesn’t apply to money market funds or their ultra-short bond fund.) Price also imposes 1-2% redemption fees on a large and growing number of funds. On most of these the fee is imposed if the fund (or shares) was purchased within the past 90 days. The fees are reinvested into the fund for benefit of shareholders.
At Oppenheimer investors face the opposite situation. Their policy is to block the sale of a fund you’ve purchased within the past 30 days - but you are allowed to move into a money market fund earlier if you want to. D&C states that they monitor for excessive trading and may ban or impose restrictions against investors whose practices appear detrimental to the fund or its shareholders. However, to my knowledge, there are no
concrete (or
steel or
chicken-wire) barriers.
https://www.seclaw.com/markettimingislegal1203-2/
