Spitzer spotlight on US mutual fund

FIDELITY Investments, the largest US mutual fund company, has been subpoenaed by Eliot Spitzer as the New York attorney general deepens his probe into illegal fund-trading.

Meanwhile, an Arizona company involved in the same Spitzer inquiry, Security Trust, said its chief executive had resigned.

Fidelity said the subpoena had been served last week and that it was co-operating. A spokeswoman said Fidelity had policies against late trading, the practice at the heart of the investigation.

Late trading is a technique by which broker-dealers take advantage of time zone differences to trade mutual funds after hours, operating on so-called stale prices. Spitzer has compared it with betting today on yesterday's horse race.

Spitzer had claimed that Security Trust had helped one client, hedge fund Canary Capital Management, trade hundreds of mutual funds as late as 9pm in New York, but at stale 4pm prices.

Canary agreed to pay $40m (£23.9m) to settle its portion of the probe without admitting wrongdoing.