Report finds funds scams uncommon

Managed funds scams known as "late trading" and "market timing" that have fleeced US investors are not "commonly practised in New Zealand", the Securities Commission has found.

The financial watchdog said it had completed an inquiry into the pricing practices of fund managers initiated after concerns were raised in the United States and Australia.

Late trading involves fund managers selling shares or units in funds after the market closes. This sometimes allows investors to profit from information not available to those who completed trades during normal hours.

Market timing involves investors buying units, the price of which, for technical reasons, has not reflected the change in the value of the underlying assets.

Unlike the US managed funds industry, which prices on a forward basis, New Zealand and Australian fund managers account historically.

The commission said there was more potential for market timing where historical pricing was used but it noted that most New Zealand fund managers had taken steps to detect and deter the practice.

The Investment Savings and Insurance Association welcomed the report, saying the US findings had cast a cloud over fund managers.

"We are pleased that the findings of the commission confirm our belief that the unacceptable practices in the US have not been repeated in New Zealand."

It said the findings of the New Zealand regulators were consistent with the results of a similar inquiry conducted in Australia.