updated 1/12/2004 3:39:40 PM ET 2004-01-12T20:39:40

The Securities and Exchange Commission has begun a formal investigation into trading activities at Fremont Investment Advisors, a small San Francisco-based mutual-fund manager, according to a regulatory filing.

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The U.S. Attorney General for the Northern District of California and the New York attorney general have also requested information from the firm, according to a filing Friday with the SEC.

Fremont, which runs the Fremont Funds, said it is cooperating fully with the inquiries.

Fremont's board established a special committee of independent directors to oversee a review of the funds' trading practices, the filing said.

Fremont's review hasn't turned up any evidence of late trading but it has found evidence of past market-timing arrangements with a few clients.

Market timing is the practice of quickly trading in and out of funds to take advantage of discrepancies between the fund's share price and the value of its holdings. It is not illegal per se, though regulators have alleged it amounts to civil fraud if practiced by companies that have promised their customers they don't allow it.

The last market-timing arrangement at Fremont ended in the fourth quarter of 2002, the filing said.

For each client that actually traded under the market-timing arrangements, the trading activity resulted in a net loss to the client in each fund in which the client had an arrangement, according to the filing.

Fremont said managers that were believed to have initiated, negotiated or approved the arrangements left the firm for unrelated reasons.

Fremont hasn't finished its internal review, and the impact to the funds hasn't yet been determined, the filing said.

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