In a highly unusual move, T. Rowe Price has permanently banned 2,000 participants in the American Airlines 401(k) plan administered by J.P. Morgan from trading in the four funds available on the menu. News of the ban was uncovered by Reuters.
The move was caused by an investment newsletter, “EZTracker,” which all 2,000 participants subscribed to, that recommended trades causing “collective” trading and, according to T Rowe, disrupting portfolio strategies and raising costs for long-term investors because the fund company is forced to buy and sell at inopportune times. Another 800 subscribers to EZTracker in the AA plan were sent warning letters.
The AA plan has 80,000 participants and the company is in the process of merging with USAir — although the Justice Department is contesting the move. AA recently distributed $3.5 billion from one of its DB plans.
Experts are questioning why T Rowe, which has over $600 billion in AUM, is singling out a relatively small group of investors who, while banned from trading, still may invest or sell their holdings in the four funds in the plan. A change to the 2010 prospectuses allowed T Rowe to make the move.
