Investors who lost money because of the rapid-trading rip-off uncovered in 2003 are finally getting some payback. Holders of PBHG funds (a family that no longer exists) are in the process of receiving checks totaling $267 million, and millions more shareholders in other fund families will split about $3 billion more over the next few years.
The method used to calculate payouts is complex, so it's hard to say who will get how much. Clients who had money in certain PBHG funds between June 1998 and December 2001 will receive about $180, on average, says Kenneth Lehn, a University of Pittsburgh finance professor who crafted the payout plan for the Securities and Exchange Commission. Individual payouts for other PBHG shareholders are unlikely to exceed $500.
The money for the $3-billion-plus restitution pot comes from fund companies, executives and big investors who broke trading rules by engaging in a practice sometimes labeled market timing but more properly described as rapid trading. By illegally trading in and out of funds quickly, the traders exploited fund prices that didn't reflect the actual prices of the assets in those funds. Customers ended up paying for the illegal profits in the form of lower fund-share prices. Some of the largest paybacks will come from Invesco ($375 million), Janus ($225 million) and Bank of America ($375 million).
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In the PBHG case (and probably all the other cases), payments won't be made for amounts less than $10, Lehn says. Money that can't be returned -- because of uncashed checks, for example -- will be added to funds in which rapid trading occurred. But those additions will cause only minuscule increases in share prices.
The SEC and state securities agencies have done a good job handling the payouts, says Niels Holch, executive director of the Coalition of Mutual Fund Investors, a consumer group. But tracking these cases isn't easy, he says. Fortunately, the Coalition of Mutual Fund Investors offers a rundown of the cases online.
-
What Is a Qualified Charitable Distribution (QCD)?Tax Breaks A QCD can lower your tax bill while meeting your charitable giving goals in retirement. Here’s how.
-
Embracing Generative AI for Financial SuccessGenerative AI has the potential to reshape how we approach learning about and managing our personal finances.
-
Best Banks for High-Net-Worth Clients 2024wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2024 and 2025: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024 and 2025.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
