Fundsters interested in the ETF side of the mutual fund world may want to take a look at the Financial Times and keep an eye on the SEC. Kara Scannell reports that, according to unnamed sources, the regulatory agency is looking into the possible use of ETFs as a disguise for insider trading.

For example, via "ETF-stripping," an insider trader could buy an ETF of an index that includes a stock they have insider information about, then sell short the other components of the index, without ever directly touching the stock in question. (One could use an index fund, too, but perhaps not always since they trade daily, not throughout the day.) 

Edited by: Neil Anderson, Managing Editor


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