Santa Monica-based Wilshire Associates
confirmed Monday in a press statement that the Securities and Exchange Commission (SEC) is looking into trades it made in mutual funds.
An article published by Money Magazine
in September helped kick off the probe. According to that article, Wilshire CEO Dennis A. Tito
initiated the trading strategy in 1993 that involved the purchase of shares of indexed stock funds in order to hedge short positions in futures contracts covering the same indices. The arbitrage play exploited pricing discrepancies in the futures contracts.
Wilshire said is ceased making the trades when it dropped the strategy from its repertoire earlier this year. It had ceased making the trades in client accounts at the end of the first quarter of 2002. In its best year, the strategy earned a 30 percent return, according to the statement made by Wilshire.
"The firm does not believe that its conduct violated any law, and has been cooperating fully with the S.E.C., and intends to continue to do so," the statement said.
The firm also said that there have been no firings or suspensions as a result of the probe.
Last week the Massachusetts pension board delayed renewing its consulting contract with Wilshire because the Money Magazine article.
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