SEC Judge Dismisses Late-Trading Case Against Former J.B. Oxford Lawyer
A Securities and Exchange Commission administrative law judge has dismissed charges against Scott G. Monson, the former general counsel for J.B. Oxford, for allegedly enabling late trading. The SEC had charged Monson with approving more than 12,000 late trades in 600 funds between June 2002 and September 2003.
Although the judge found that Monson contributed to late-trading violations, he couldn't be held accountable because he didn't know about the rules or "how mutual funds were priced," and, therefore, didn't intentionally break them, Judge Robert Mahoney said.
"The division has failed to prove by a preponderance of the evidence that Monson knew, or should have known, that drafting the procedural agreement would contribute to" the firm's violations, Mahoney wrote.
The SEC may still appeal the decision.
Mutual Fund Fees at Lowest in 25 Years: ICI
The Investment Company Institute released a report Tuesday indicating that mutual fund fees are at their lowest levels in 25 years, a result of investors' increased appetite for low-cost funds and greater competition among mutual funds.
"Fees are important to investors, and this study shows that they continue to pay close attention to them," said ICI Senior Economist Sean Collins.
Fund fees have been decreasing since 1980, the ICI said, the greatest among stock and bond funds, whose fees have decreased by more than 50%. Fees for money market funds have decreased about 25% in the period.
In 2006, equity fund investors paid an average of 107 basis points in fees and expenses, down four basis points from 103 basis points in 2005. Bond fund investors paid an average of 83 basis points last year, down five basis points from the year before, and money market fund investors paid an average of 40 basis points, a two-basis-point decline.
The ICI also found that 90% of the assets held in stock funds are in those with below-average expense ratios.
The decline in fees and expenses on stock funds also owed in large part, the ICI said, to lower loads that investors paid last year. While the average maximum sales load in 2006 was 5.28%, discounts on large purchases and waivers on purchases through 401(k) plans brought the actual average that investors paid to only 1.31%.
Colorado Hedge Fund Execs Settle Civil Suit For $30.6 Million
Three executives of a hedge fund in Colorado have settled a civil suit for $30.6 million, the Colorado Springs Gazette reports.
The three are Hamilton Alan Bird, David Edward Newton and Douglas Alan Scott, formerly of XL Capital Partners and the Vision Fund, who are paying $21.6 million, $8.2 million and $851,000, respectively.
Bird and Scott still face criminal charges on state securities fraud and theft charges, with Bird's court date scheduled for Aug. 13 and Scott's on Sept. 4. In exchange for testifying against his former partners, Newton reached a plea bargain in January on a securities fraud charge, for which he will be on probation for 15 years and must conduct 200 hours of community service.
All three have been banned from the securities industry for life.
Second Pilgrim Baxter Remuneration, $73 Million, Soon to be Mailed: SEC
The Securities and Exchange Commission announced that a second group out of a total of three groups of Pilgrim Baxter investors will soon receive $73 million. The remuneration is part of a total of $267 million in the Pilgrim Baxter fair fund, set aside to repay 384,000 investors harmed by market timing in the PBHG Funds, for which Pilgrim Baxter was the investment advisor, between June 1998 and December 2001.
The first $125 million was sent to investors in April of this year. The SEC expects the third disbursement to be made before Sept. 30.
To date, the SEC has distributed more than $1.8 billion in fair funds to investors.
More Employers Shorten 401(k) Eligibility Period To Within Three Months
Employers are doing a better job of helping their workers save for their retirement, with 69% permitting new employees to begin contributing to their 401(k) within three months, up from 65% in 2005, according to the Profit Sharing/401(k) Council of America.
The organization also found that among large employers with 1,000 or more employees, nearly 85% offer eligibility within three months, up from 79% in 2005.
"Shorter eligibility periods are good news for workers," said David Wray, president of the Profit Sharing/401(k) Council. "Basically, we don't want a participant's 401(k) savings to be interrupted when they change jobs. You want a system where employees are constantly in a savings status."
Morningstar Raises Bar for Stewardship Grades, with Focus on Culture, Boards
Morningstar has raised the bar for the stewardship grades it has been giving to mutual fund companies since 2004 for sound corporate practices, namely: regulatory history, fees, fund manager incentives, board governance quality and corporate culture. Morningstar said it will now change underlying criteria for four of the above areas, leaving fund manager incentives alone.
Specifically, Morningstar said it will pay closer attention to fund companies' corporate culture, increasing it from 20% of the grade to 40%, as well as the independent composition of their boards. In addition, Morningstar said, firms with poor regulatory histories will lose points.
"The stewardship grades have been a catalyst for positive change in the fund industry, and we're committed to continuing to shine a light on the industry's best and worst practices so investors can make more meaningful decisions about where to invest," said Laura Pavlenko Lutton, senior mutual fund analyst and head of the stewardship grade committee.
"We're constantly evaluating our methodologies and felt it was a good time to revisit the grades and better recognize firms that do more than just obey the law and follow industry norms," she added.
State Bank of India Offers India, Vietnam Fund
Two subsidiaries of the State Bank of India, SBI Asset Management and SBI Funds Management have together launched the SBI India & Vietnam Stock Fund.
The two parties reached an earlier agreement last August to establish a $100 million venture capital fund to invest in private companies in India. The mutual fund just announced is their second joint venture.
The State Bank of India is the nation's largest commercial bank in terms of assets, earnings, branches and employees. Dating back to 1806, it is also India's oldest bank.
Marsico Buys Back Namesake Firm From BoA
Thomas Marsico, who rose to fame as a standout portfolio manager at Janus Capital before founding Marsico Capital Management in 1997, has bought back his namesake firm from the Bank of America. Terms of the deal were not disclosed. The company, which specializes in growth-oriented equity, has $94 billion of assets under management and employs 71 people.
"We feel this transaction solidifies Marsico Capital Management's foundation and helps ensure a long-term successful future for our company," Marsico said. "I am pleased and proud that Marsico Capital Management will be an independent investment management firm."
BoA purchased a 50% stake in Marsico in 1999 for $150 million and the remainder of the firm two years later for $950 million.
ABN AMRO Plans Fund With India, China Focus
ABN AMRO is planning to launch the Chindia Fund, a stock mutual fund that will invest 35% of its assets in China and 30% in India, with the rest going to stocks, debt and money market securities in other international countries, Reuters reports.
Through June 13, the Shanghai stock index is up 56% year to date, and India's BSE index is up 1.57%.
The fund will charge an entry load of 6% and an exit load of 1% for redemptions within six months.
BlackRock Launches Nine New Lifecycle Funds Targeting 2010 to 2050
BlackRock has added nine lifecycle prepared portfolios to its offerings for investors, designed for use in defined contribution and long-term retirement plans.
The funds have target maturity dates from 2010 to 2050. Once an investor's retirement date has been determined, the glidepath of the fund will set future portfolio asset allocations, and risk will lower as retirement nears.
"The [Pension Protection] Act of 2006 is rapidly driving defined contribution plan sponsors to some critical decisions points," said Douglas DuMond, managing director and head of the U.S. defined contribution business at BlackRock.
The glidepath of lifecycle funds is an important component to their success, and BlackRock plans ongoing risk monitoring of the portfolios.
"The glidepath allows for the flexibility to exploit broad market opportunities, a feature most glidepaths do not offer," BlackRock states. The fund will be rebalanced periodically to include market movements and valuations, not just fund cash flows.
Kensington to Debut Global Infrastructure Fund
Kensington Investment Group is set to launch the Kensington Global Infrastructure Fund, a first-of-its-kind fund in the U.S. The fund will offer investors exposure to a portfolio of companies providing vital services for the growth and development of communities around the world.
The fund will be benchmarked against the S&P Global Infrastructure Index, which tracks infrastructure companies. The company expanded the asset class to include communications, social services and companies involved in construction.
"We see infrastructure investing as a logical progression for our clients and for us as a team," said Portfolio Manager Joel Beam. "With its historical return profile and powerful secular trends serving as catalysts, we expect that over time, infrastructure could become a cornerstone of investment portfolios."
Privatization is sweeping the U.S. Once government-financed and operated infrastructure assets are now being leased to private entities, a trend that started in Europe several decades ago.
"Growing interest in privatization of infrastructure assets is not an accident," said John Kramer, president and co-chief investment officer at Kensington. "As urban populations swell and globalization demands that businesses compete internationally, governments are seeking new sources of capital to fund infrastructure projects as a means of driving economic and productivity growth," he said.
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