To some, it seemed like mutual funds were spared the sort of reputational hit that hedge funds suffered in the wake of the financial crisis. But while they were spared shocking headlines, they suffered nonetheless, as retail investors increasingly jumped out of the market. Many customers might have concluded that the market was rigged against them.

Unfortunately, the on-going expert network insider trading scandal, about which we have few details, has ensnared a lot of mutual funds. Independent research firm Broadband Research, which was visited by FBI agents seeking cooperating witnesses, works with a lot of mutual funds including Janus, MFS Investment Management, Friess Associates, Ameriprise's Columbia Management and Wellington Management (a Vanguard subadvisor).

"The fact that mutual fund companies could be involved in a probe sets it apart from previous insider-trading scandals at hedge funds because it would involve average retail investors--the biggest users of mutual funds," notes Investment News.

Some fear the scandal is merely the latest reason for individual investors to stay out of equity funds, though many seem more than willing to stream into bond funds. All in all, fund executives have to be nervous right now, as the parameters of the probe remain unclear. Many are no doubt reviewing their relationships with certain research firms.   

For more:
- here's an Investment News article

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