Special Program Root Tag

Inspired by the recent reports of hedge fund managers making hundreds of millions of dollars a year, in some cases, more than $1 billion, NBC News this week ran a story on these fabulously wealthy people this.

Fidelity Investments has expanded the sales and relationship management team at its registered investment advisor group by hiring 10 additional staffers, bringing the total number on the team to nearly 125.

The Securities and Exchange Commission is investigating potential securities fraud with respect to the securitization and sale of subprime loans, SEC Chairman Christopher Cox told Congress Tuesday, Dow Jones reports.

Although in April, Edward Jones proposed settling investor lawsuits over hidden revenue-sharing agreements for $127.5 million, the firm is now trying to postpone approval of that settlement from July 20 to Oct. 1, the St. Louis Daily Record reports.

Principal Global Investors has signed a definitive agreement to acquire stable-value manager Morley Financial Services, which has more than $14 billion in institutional assets under management.

The MainStay division of New York Life Investment Management is planning a series of five MainStay Retirement Funds, target-date funds with retirement dates spanning from 2010 to 2050. NYLIM’s equity investors group will manage the funds and New York Life Retirement Plan Services will distribute them.

On a new twist from the recent trend of mutual fund companies acquiring hedge fund and other alternative investment money managers, BlackRock announced Tuesday that it is acquiring the funds-of-funds division of Quellos Group for up to $1.7 billion. The division runs funds-of-funds that invest in mutual funds, hedge funds, private equity, real estate and hybrid offerings.

The Alliance in Support of Independent Research has asked Securities and Exchange Commission Chairman Christopher Cox to reconsider repealing Section 28(e) of the Securities and Exchange Act of 1934 that permits soft dollars to pay for investment research.

Many financial advisers are still grappling with how the Pension Protection Act permits them to give advice to 401(k) plans, Investment News reports. And a good majority doesn’t want to move to fee-based accounts from commissions.

For the first time since the bear market of 2000-2002 and the mutual fund trading scandal that so tarnished its image, Janus Capital appears to be rising out of “purgatory,” Kiplinger’s Personal Finance reports.

Testifying before Congress on Tuesday, the five Securities and Exchange Commissioners said they were doing a good job of policing corporate America.

In an effort to offer a low-volatile option for defined benefit plans, Vanguard will launch an Extended Duration Treasury Index Fund, tied to the Lehman Brothers Treasury STRIPS 20-25 Year Equal Pay Bond Index.

David van Duyn, a former lawyer at Fidelity Investments’ risk oversight and enterprise compliance unit, has sued the company, charging it failed to comply with anti-money laundering laws, Reuters reports.

John Hancock has settled with the Securities and Exchange Commission on charges that it failed to disclose revenue-sharing agreements. The firm, which neither admitted nor denied the allegations, is paying $21.2 million.

Score one for the mutual fund industry.

Milton Shaffner, 92, is tired to prying bulky mutual fund publications out of his mailbox, and is lobbying the industry and regulators to cut back on paper, the South Florida Sun- Sentinel reports. “I don’t think anyone sits down and reads a 242-page report on his funds,” the retired lawyer said. So he wants fund companies to stop clogging his mailbox and spending shareholders’ money to produce and mail them. The Pompano Beach man also questions why he gets book of information dedicated mainly to funds he does not own, rather than only the pages relevant to his holdings. Of course, Shaffner’s contention that investors don’t read these lengthy disclosures—seven of 10 never looks at them when choosing funds—dovetails with Securities and Exchange Commission Chairman Christopher Cox’s initiative to move mutual fund shareholder communication online. It also complements the Investment Company Institute’s push to streamline paper disclosures. Shaffer has written on several occasions to the SEC, to his fund company, and to the local paper. He applauds these streamlining efforts. And although he probably won’t go online to get information himself, he’s happy if it will keep paperwork out of his mailbox. “Maybe if they save $5 million in unnecessary expenses, they’ll increase the dividend instead of cutting it,” Shaffner said.

A proposed change in the tax code could slim some hedge fund managers’ paychecks, according to the International Herald Tribune. Senate Finance Committee Chairman Max Baucus (D-Mont.) and member Charles Grassley (R-Ia.) introduced a bill last week to increase taxes on private equity firms that go public. There is speculation that in upcoming weeks, a similar bill aimed at hedge funds and private equity companies will hit the Congressional floor. Presently, the performance fees managers levy are taxed at the 15% capital gains rate, rather than the higher income tax rate of 35%. The tax, if adopted, could mean $4 billion to $6 billion more in government coffers, and help offset the alternative minimum tax many Americans now pay, according to the Treasury department. Many credit the tax advantage with helping the incredible wealth among hedge fund managers. The U.S. Chamber of Commerce and the nascent Private Equity Council have begun ardent lobbying efforts against the proposal. “It gives an advantage to some people depending on how they set up their tax structure,” said U.S. House Ways and Means Committee Chairman Charles Rangel (D-N.Y.). “And we believe that’s not how it should be.” 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.

Bear Stearns will provide up to $3.2 billion to finance its struggling hedge fund, according to Reuters. Bear said it provided secured financing to the High Grade Structured Credit Strategies Fund, which, according to a source familiar with the situation, was down about 5% through April. The financing will eliminate exposure that Citigroup and Barclays had in the fund, sources said. A restructuring plan is still being worked on with creditors for the second fund, sources said. The High Grade Structured Credit Strategies Enhanced Leverage Fund was down 23% for the year by the end of April. 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 U.S. District Court for the Southern District of New York has entered its final judgment against Scott A. Christian, a former broker for Trautman Wasserman, for his role in market timing and late trading. Without admitting or denying the Securities and Exchange Commission’s charges, Christian consented to a $250,000 fine. According to the SEC’s complaint, Christian enabled a number of the brokerage’s customers to late trade mutual funds by time stamping their orders before the market’s 4 p.m. close but submitted the orders as late as 6:30. Forty fund companies sent more than 300 letters both to Christian and Trautman Wasserman asking them to stop the excessive trading. To circumvent their scrutiny, Christian then opened up multiple accounts for his customers and used various registered representative identification numbers. A related case against six other principals of the firm is still pending. They are Gregory O. Trautman, Samuel M. Wasserman, James A. Wilson, Jr., Mark Barbera, Jerome Snyder and Forde H. Prigot.

In the interest of increasing the number of exchange-traded funds available in Japan and preparing itself to go public, the Tokyo Stock Exchange plans to change its rules to allow non-Japanese ETFs to be listed, according to The Nikkei Report. Domestic ETFs in Japan, by law, can use only the Nikkei Stock Average and Topix as the indexes on which to base the funds. As a result, when it comes to ETFs, investors on the Tokyo Exchange have only 11 choices. The rules on foreign ETFs are expected to be far less restrictive. For example, the Tokyo Exchange expects the Financial Services Agency to allow ETFs based on commodities indexes. The Tokyo Exchange is aiming to make ETFs the core product of its investment offerings before going public, an event tentatively slated for 2009. 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.