While there are many kinds of investment strategies, market timing is one that can easily turn into a fraudulent scheme. Such a situation may eventually catch the attention of both the SEC and the FBI.
Meanwhile, as an individual hedge fund investor, you may suspect that you have become the prey of a scurrilous money manager who is intent on increasing his own bottom line.
What market timing is
Market timing is the strategy of making decisions to buy or sell stocks or other financial assets based on predicting the price movements for future aggregate markets. One example of nefarious activity is illustrated by an SEC lawsuit filed in 2003 against Invesco Funds Group. The SEC alleged that the firm was fraudulently accepting market timing transactions from "Special Situation" investors in order to boost management fees. The SEC went on to charge that in granting special trading privileges to certain customers, the company violated its fiduciary responsibility to all its shareholders.
How it can involve the FBI
Discovering corporate fraud is among the highest priorities of the FBI. Such activities not only affect investors but can also cause significant damage to the U.S. economy. In addition to market timing schemes, late trading and the falsification of net asset values raise red flags about an investment fund that may be legitimate in other respects. The FBI will investigate with the help of partnerships created with regulatory agencies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission.
How to resolve investor problems
If you feel you are a victim of stock or broker fraud, a legal firm with attorneys who are highly knowledgeable about the securities industry can provide advice and experienced representation, if needed. Many disputes between investors and their investment management firms can reach a resolution through arbitration, although more complex cases may require other actions. Fraud perpetrated through a marketing timing scheme may qualify.