Money Management Executive Latest News

Citigroup’s Smith Barney division has agreed to pay $50 million to settle market-timing charges from the New York Stock Exchange and New Jersey regulators. NYSE Regulation also charged the company with failure to supervise trading of mutual funds and variable annuity sub-accounts and improper books and records.

Shortly after Barclays announced that it was filing with the SEC to offer the first-ever municipal bond exchange-traded fund, so did State Street Global Investors, the New York Daily News reports.

Asset management firms, including Merrill Lynch, Goldman Sachs and JPMorgan, have created a new type of product called hedge fund “clones,” or “synthetic” hedge funds, which employ hedge fund strategies without charging the typically high fees or imposing long lock-in periods or high investment minimums, The Wall Street Journal reports. Some are tied to hedge fund indexes, while others use more complex strategies.

The Hartford Financial Services Group reached a $115 million settlement with regulators in Connecticut, New York and Illinois over charges it conspired with Marsh & McLennan to submit false bids on property and casualty insurance, paid hidden fees to brokers and permitted some investors to market time mutual fund sub-accounts in its variable annuities.

We've got to hand it to the board of directors at AIM Investments for acting responsibly and in direct response to a profound change in public sentiment.

Chester Spatt, chief economist and director of the Office of Economic Analysis at the Securities and Exchange Commission, will leave for a post at Carnegie Mellon University in Pittsburgh, according to US Fed News. Spatt took leave from the university, where he had worked since 1979, to serve the SEC in 2004. During his tenure at the SEC, Spatt led analysis of the impact of issues including options expensing, option grants and backdating, mutual fund late trading and market timing and executive compensation, among others. “His exceptional background, expertise and judgment concerning the economic underpinnings of our securities markets have been invaluable resources to the Commission,” said SEC Chairman Christopher Cox. “He has been a strong leader of a very talented staff, and all of us at the Commission are deeply indebted to him for his personal and professional contributions to the nations’ markets and investors.” The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

The subprime loan fiasco will actually boost the returns of hedge funds holding instruments that take advantage of distressed debt, or inefficiencies in the market, AFX International Focus reports. But hedge funds holding credit default swaps, a form of credit protection, will suffer, industry insiders said.One fund that will benefit is the $13 billion Paulson Credit Opportunities

Since many 403(b) plans offered at non-profits have had little or no employer oversight, the Internal Revenue Service is going to require their sponsors to assume fiduciary duty, much as 401(k) sponsors to, The Baltimore Sun reports. The IRS wants these plans to pare pack offerings, which sometimes number into the hundreds, and offer lower-cost choices. Although the IRS said it would make the changes two years ago, it now says it will issue new guidelines this coming year, perhaps as early as January. The changes will require employers to be more involved in managing their 403(b)s, said Michael Beczkowski, a senior consultant with Bolton Partners, a benefit consulting firm. “The more egregious products will be weeded out,” he said. That could mean fewer annuities, as today, 80% of the $652 billion in 403(b) plans is in annuities, according to Spectrem Group. Sponsors of 403(b)s will have to supply the plans’ rules in writing, along with the names of the investment companies in the plan, and they will have to notify people when they are eligible to participate in the plan. “Schools have done a horrible job of letting eligible people know,” said Dan Otter, founder of 403bwise, a 403(b) information center. However, while 403(b) participants may currently invest in any investment company, whether it’s listed in the plan or now, under the new guidelines, they will lose that flexibility, Otter said. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Facing a weakening dollar, U.S. investors are increasingly using exchange traded-funds to access overseas markets, according to Dow Jones. International equity ETFs gained $25 billion in the first half of 2007, compared to $13 billion for domestic stock funds. Compared to 2006, that is a 61% increase, from $80.8 billion to $129.8 billion for the period, according to State Street Global Advisors. Senior Managing Director James Ross attributed the increased popularity to a weak dollar and strong international market performance. The State Street SPDR Dow Jones Wilshire International Real Estate Fund has attracted $939 in assets between January and June. The Dow Jones Euro STOXX 50 Fund has won $191 million during the same time period. The SPDR Russell/Nomura Small Cap Japan Fund enjoyed $159 in inflows for State Street year-to-date. The SPDR S&P BRIC 40, which invests in the biggest public companies in emerging markets including Brazil, Russia, India and China, has raised $17 million between its June 22 launch and the end of that month. Next on the agenda for State Street are international and global bond ETFs, especially those related to government debt and international treasury-inflation-protected securities, said Ross. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Both the Securities Industry and Financial Markets Association and the Investment Company Institute sent letters to the Securities and Exchange Commission urging it not to discontinue 12b-1 fees, which, the ICI estimates, are used by 70% of funds today. SIFMA, representing the securities and bond industry, said that eliminating the fees would harm investors, since it helps fund critical investment guidance from financial advisers, and would also curtail innovation and competition in the marketplace. SIFMA did concede, however, that such fees should be properly disclosed to investors. “We disagree with the notion set forth that Rule 12b-1 was intended to be a temporary solution, or the notion that the rule did not contemplate payments to dealers,” SIFMA maintained, pointing to the SEC’s recent June 19 roundtable on the subject. SIFMA maintained that panelists, many of whom were involved in drafting the rule, “uniformly confirmed that Rule 12b-1 was never meant to be a temporary solution.” The group said 12b-1 fees support “necessary administrative and investment services for fund shareholders” that are largely borne by intermediaries rather than fund companies. SIFMA also said that the nine factors that the SEC set forth for fund boards to consider when deciding whether to levy 12b-1 fees have become outdated. For its part, the ICI also said that 12b-1 fees are “integral to the structure of the mutual fund industry and to the delivery of advice and other services that fund investors consider absolutely essential,” most notably advice from financial intermediaries. The ICI suggested that rather than naming the fees after a reference to an SEC rule, the fees should be renamed. And while the ICI called for better disclosure of the fees to investors, the trade group said, however, that if the SEC were to require funds to disclose such fees at the point of sale but not impose similar requirements on other types of investment products, it “could encourage intermediaries to steer clients to alternative investments that do not offer the same level of protection, diversification and liquidity as funds.” The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.