CNBC's John Carney explains why he thinks T. Rowe Price [profile] banned 1,300 American Airlines employees from trading in four of its funds. Bloomberg Businessweek covered the original story.

The trades were viewed as disruptive by T. Rowe, Carney says, and they were looking to avoid a mass exit on their funds, which would cause PMs to sell assets, Carney writes.

That could mean that prices would move further away from the fundamentals than T. Rowe would like, Carney explains. Generally funds have cash available and have a reasonable flow of investors let into and out of the fund at a time but in this case the EZTracker newsletter is moving the actions of over a thousand people, Carney writes.

EZTracker's publishers have said this is discriminatory, but T. Rowe is simply defending its business model, Carney writes. Carney reports that T. Rowe is pretty clear in its prospectus, saying their funds aren't intended for excessive trading and that they can terminate investment privileges for those who trade excessively, specifically mentioning newsletters.

To read more, click here and here.  

Edited by: Casey Quinlan


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