Practice

WASHINGTON -- While the annuity industry remains hush-hush on the topic of the market-timing cases being brought by the Securities and Exchange Commission and the New York Attorney General, this silence does not indicate a lack of opinion. Speakers and attendees alike voiced their views on the brewing market-timing trouble and regulatory implications for the variable annuity industry here at the Regulatory Affairs Conference sponsored by the National Association for Variable Annuities of Reston, Va. And the consensus was that preventing market timing in annuities is more complex than preventing it in mutual funds.

For its alleged part in a market-timing scheme, Van Eck Associates, which advises the Van Eck Funds, and two of its executives may be facing Securities and Exchange Commission charges, the company indicated in a filing. The news is far from surprising, since the firm has a lot of international funds that trade in different time zones. As the latest in a long list of high-profile companies named in the scandal, including Putnam Investments and Janus Capital, the announcement by Van Eck represents another step down in what seems to be a never-ending stairwell of charges. As Morningstar Director of Fund Analysis Kunal Kapoor put it, "It's been more widespread than most folks would have imagined."

The Securities and Exchange Commission hit Angelo Haligiannis and his Sterling Watters Group hedge fund with an emergency enforcement action for lying to investors about performance, complete with false documents, prospectuses and marketing materials. The fund's general partners, Sterling Watters Capital Advisors and Sterling Watters Capital Management, were also named as defendants.

Following the Mutual Fund Directors Forum's "best practices" could spell a bad reality for investors, a number of independent research firms argue in a letter to the Securities and Exchange Commission.

Participants in 401(k) plans saw their account balances grow by more than 29% last year, evidence that despite a difficult bear market in previous years, investors are still turning to the vehicle as an effective way to save over the long-term. This is according to a recent study released by the Investment Company Institute and the Employee Benefit Research Institute.

Participants in Manulife USA lifecycle funds have reaped higher returns on their investment in the last five years than do-it-yourself asset allocations, a recent survey conducted by investment consulting firm Burgess + Associates shows.

Now, mutual funds don't have to feel quite so lonely. The Securities and Exchange Commission and New York Attorney General Eliot Spitzer have settled their first market-timing case against variable annuity issuers, with fines and disgorgement totaling $20 million.

The Securities and Exchange Commission is reconsidering proposals to curb market timing and eliminate late trading because the measures may unfairly affect pension plan participants and other long-term shareholders, according to the Government Accountability Office.

Strategic five-year plans are a fact of life to corporate executives. But for the Securities and Exchange Commission, the nation's top securities regulator, this year's newly released five-year plan spanning 2004 through 2009 took a lot of blood, sweat and tears and includes several lofty goals. These include stepping up examinations of investment companies deemed most at risk for problems, modernizing information technology systems, more aggressive hiring of both accountants and investment company examiners, and redesigning its pay, benefit and training programs for employees.

The former Evergreen Investments portfolio manager who was found to have engaged in allegedly improper trading of his own mutual fund shares likely was Prescott Crocker, former skipper of the Evergreen Precious Metals Fund and its High-Yield Bond fund, according to fund research firm Morningstar.