Waddell Adopts Fee to Curb Market Timing

Waddell & Reed Financial Inc., which sells mutual fund shares through 3,000 financial advisors, added a 2% redemption fee to 24 equity funds and 12 bond funds to deter abusive short-term trading.

Sales of shares held for less than five days will be subject to the charge, the Overland Park, Kan.-based company said in filings with the Securities and Exchange Commission. The new fee applies to 19 Waddell & Reed funds and 17 others managed under the Ivy brand name, the filing said.

The SEC on Wednesday proposed a mandatory 2% redemption fee on shares owned for five business days or fewer. The agency and state regulators have uncovered dozens of instances of investors making short-term trades in funds that diluted gains for long-term shareholders and contradicted fund prospectuses.

Companies including Fidelity Investments and Putnam Investments have added new fees to deter short-term trading since Sept. 3, when New York Atty. Gen. Eliot Spitzer announced a probe into the $7.4-trillion mutual fund industry.

Shares of Waddell & Reed lost 7 cents to $25.88 on the New York Stock Exchange.