Investment management giant Federated Investors quarterly profits dropped 12% after taking a $20 million charge to cope with improper mutual fund trading.

The Pittsburgh-based company said fourth-quarter net income fell to $42.8 million, or 38 cents a share, compared to $48.9 million, or 42 cents a share, in the year-ago period.

The results included a charge of 12 cents a share for the creation of cash reserves to pay restitution to investors who suffered losses as a result of illegal late trading and deceptive market timing practices.

Federated said last week it set up a $7.6 million fund to repay harmed investors and used another $12.4 million to pay for its internal probe into questionable trading practices.

Excluding the one-time charge, the company posted net profits of 50 cents a share. Wall Street analysts, on average, were expecting Federated to earn 47 cents a share, according to research firm Thomson Financial First Call, sister company of Thomson Media, publisher of this newsletter.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.