The Securities and Exchange Commission announced Thursday that Fred Alger Management and Fred Alger & Co. will pay $40 million to settle charges that the firms allow both market timing and late trading in the Alger Fund.
The SEC found that the companies failed to disclose the violations to the board of directors of the fund.
Without admitting or denying the charges, the companies agreed to pay a $30 million disgorgement and a $10 million penalty. The entire $40 million will compensate investors. The company also agreed to retain an independent consultant to oversee its compliance policies and procedures.
The SEC found that Alger permitted a number of clients to market time the Alger Fund between 2000 and 2003 and that in 2002, the company demanded that they make a 20% sticky investment commitment to at least one of the funds managed by the firm. One investor, hedge fund Veras Investment Partners, the SEC said, late traded the fund.
“Alger breached its fiduciary duties when it allowed harmful market timing in exchange for the additional management and other fees generated by the timers’ money,” said SEC Director of the Northeast Regional Office Mark K. Shonfeld. “In particular, Alger affirmatively attempted to lure timers to its funds by permitting them to time if they agreed to make a sticky asset investment.”