Timing Is Everything: Mutual Fund Managers Had Duty To Prevent Market Timing Behaviour

The Ontario Superior Court recently released its decision in Fischer v. IG Investment¹, a relatively rare class action common issues trial decision. The case was against two mutual fund managers in connection with market timing trading. The decision addresses principles of negligence and fiduciary obligations on a class-wide basis, ultimately concluding that the defendants had a duty to take reasonable steps to prevent market timing trade activity in their funds.

What you need to know

• "Market timing" in the context of mutual funds refers to a trading strategy whereby an investor moves money into and out of a mutual fund quickly, attempting to use inefficiencies in the market (such as a delay in market pricing) to generate profit. The Court's decision found that this type of frequent, short-term trading can harm long-term investors in the fund by diluting the value of their investment.