Besides reducing investors' gains, the effects of rapid-fire trading are widespread.

The payment is the second largest levied against a financial institution over the practice, which involves rapid-fire trading of mutual fund shares to capture price inefficiencies.

Market timing, the rapid-fire trading of fund shares to capture temporary differences in closing prices, is not illegal.

But that manager garnered that performance through rapid-fire trading.

Because Mr. Israel was known for his rapid-fire trading, the commissions would be high, Mr. Marino's letter said.

Redemption fees, therefore, can help compensate long-term fund owners and keep them from having to pay the price for others' rapid-fire trading.

Market timing itself, which involves rapid-fire trading of mutual fund shares so as to capture price inefficiencies, is not illegal.

Professional traders, mostly at hedge funds, had engaged in rapid-fire trading of otherwise innocent-looking mutual funds.

Richard A. Wines, senior managing director at the firm, points out that southern Connecticut has a disproportionate number of hedge funds, many known for their rapid-fire trading.

Just this week, state securities regulators blasted day-trading firms for misleading naive investors into the risky world of rapid-fire trading.