Scandal Now an International Affair

Published November 13, 2003, 1:00 a.m. EST

1 Min Read

Germanys securities regulator BaFin is launching an investigation of mutual fund trading practices. Spurred by the ongoing fiasco in the U.S. and recent memory of a previous fund scandal a few years ago, German regulators want to make sure that its mutual fund industry is on the up and up.

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"It was not as prevalent in Germany as in the United States, but there are always opportunities for arbitrage," one fund manager told Reuters. "Most of the fund management firms now try to protect themselves against such strategies."

Said a BaFin spokeswoman: "Against the background of what is happening in the U.S., there is no question whether something similar can happen in Germany." She added that there are no indications of malfeasance right now.

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and Bank of New York have been subpoenaed by regulators, BONY for its role as a fund administrator. Janus has also received an additional request from a regulator.

The National Association of Securities Dealers is looking into directed order arrangements that the Denver-based fund company had with one brokerage firm, in return for marketing support for Janus funds. NASD is investigating 11 other brokerages, as well, for this type of conflict of interest, and NASD Vice Chairman Mary Schapiro testified in Congress last week that she is readying a "major" case against the industry.

And, John Youngdahl, a former economist with Goldman Sachs, pled guilty yesterday to insider trading information on the U.S. Treasury bond market. His tip led the firm on an eight-minute, $317 million buying spree that netted a profit of nearly $4 million.

Under Youngdahls plea agreement, he paid $240,000 and agreed to serve between 33 and 41 months in jail.

"It is my sincere hope that those I have hurt will see in my plea of guilty, an expression of my deep regret for the pain I have caused and an acceptance of responsibility for my misdeeds," the economist said in a statement issued by his attorneys.