In March 2000, Peter Scannell had only a fundamental knowledge of how a mutual fund company worked. Despite this, he got a job at Putnam Investments' call center in Quincy , Massachusetts . Peter Scannell was only working there a short time when he became aware of efforts by outside investors to make rapid trades in and out of Putnam.
Calls would flood
call center in late afternoons between 3 and 4 pm. The trades were made by eager investors ready to make huge transfers, reflecting a practice known as market timing.
When U.S. stocks surged, boilermakers bought into funds composed of foreign companies, which had finished trading before prices for those funds were set at 4 p.m. They were betting that international markets would follow Wall Street's trajectory next day, scoring them a quick profit.
Market timing is not illegal. However, it can erode gains of long-term investors.
Scannell says he told supervisors he thought transfers might be against National Association of Securities Dealers' rules. His supervisors laughed at him saying it was not his concern and that it wasn't illegal.
