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Purpose and Services
This page was last updated on November 16, 2000. Articles by Fund Democracy: Archives Be Aware of Fund Finagling, Mutual Funds (Nov. 2000). Abstract: When are you more likely to get dressed up: when you're going out, or when you're hanging around the house? Like us, mutual fund managers often dress up their portfolios with popular stocks before taking them out in public. Even staid money market fund managers bedeck their portfolios with government bonds just before public disclosure dates to make their funds appear safer than they really are. What's more, funds often buy stocks at the end of a quarter that they already own just to get a quick performance boost. Window dressing and portfolio pumping are examples of the portfolio fraud - yes, fraud -- that plagues the mutual fund industry. Mutual funds are required to disclose their portfolios only twice a year, and fund managers routinely exploit this SEC-sanctioned concealment of their portfolios to engage in a variety of practices that harm shareholders and undermine public confidence in our securities markets. Fund Democracy, the Financial Planning Association and ten consumer groups led by the Consumer Federation of America each has petitioned the SEC to require funds to invest in ways that are consistent with their names and disclose their portfolios more frequently. Until these rules are improved, investors can protect themselve by taking a few precautions. (The full text of this article is available to Mutual Funds subscribers.) |