Investigation and pending class action against Federated Investors. Federated Investors owns and operates the Federated family of funds. This class action lawsuit alleges that Federated Investors engaged in a pattern and system of "market timing" and/or "late trading" in connection with Federated Investors' operation of the Federated family of funds.
In the United States, mutual fund prices are set once daily at 4:00 p.m. Eastern time. Late trading occurs when traders are allowed to purchase fund shares after 4:00 p.m. at that day's closing price. Under law, most mutual fund trades received after 4:00 p.m. must be executed at the following day's closing price, but because some orders placed before 4:00 p.m. cannot be executed until after 4:00 p.m., brokers can collude with investors and submit post-4:00 p.m. trades as if they had been placed before 4:00 p.m. Such trades can be made with information about after-hours market developments.
Market timing is an investment strategy in which an investor tries to profit from short-term market cycles by trading into and out of market sectors as they heat up and cool off. In many cases, funds bar or limit market timing because the practice may increase the cost of administering a mutual fund borne by all shareholders in the fund. Market Timing and Late Trading cost the investors in the Bank One funds hundreds of millions of dollars.
Name (Stock Symbol)
Federated Investors, Inc. (FII)
Federated Investors, Inc. is a publicly owned investment manager. The firm provides its services to individuals, including high net worth individuals, banking or thrift institutions, investment companies, pension and profit sharing plans, pooled investment vehicles, charitable organizations, state or municipal government entities, and registered investment advisors. Through its subsidiaries, it manages separate client-focused equity, fixed income, and money market mutual funds and separate client-focused equity, fixed income, and balanced portfolios.
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