Special Program Root Tag

"As the scandal keeps growing deeper, the need for further reform becomes clear," according to a column in the St. Louis Post-Dispatch. "It's as if the deeper regulators dig, the more rot they find," David Niklaus writes.

United States District Judge Andre M. Davis dismissed all remaining civil charges Tuesday against Charles Bryceland, a former Bank of America executive, on mutual fund timing and late trading. Although the SEC, NASD and the New York Attorney General have never charged Bryceland, he was named and then dropped as a defendant in a number of earlier cases.

The NASD has fined the former Quick & Reilly, now a member of the Banc of America Investment Services family, $570,000 for directed-brokerage violations. In addition, the brokerage industry's self-regulator imposed a $275,000 fine on Piper Jaffray & Co. for similar abuses. The Piper Jaffray fine was adjusted to reflect the firm's voluntary disclosure of its wrongdoing, which was uncovered during a self-evaluation.

The Massachusetts Securities Division has issued subpoenas to 15 banks and broker/dealers as part of an investigation into variable annuity to seniors. Some of the inquiries stem from customer complaints and others are part of an effort to learn more about variable annuity sales, reports the Boston Globe.

Fund tracker Lipper reports that flows into popular exchange-traded funds exceeded net flows to domestic equity funds on a monthly basis for the first time ever. ETF inflows were between $3.0 billion and $4.0 billion for the month, whereas flows into domestic equity funds were negative $2.8 billion.

American Express Co.'s financial advisory unit violated its fiduciary duty to clients when it provided secret incentives to its sales force to sell poorly performing in-house mutual funds, instead of investments from competitors, New Hampshire regulators allege, according to The Wall Street Journal.

A Securities and Exchange Commission settlement reached with New York-based brokerage firm Brean Murray & Co. sheds light on federal laws that securities firm Bear Stearns violated when it helped brokers at Brean Murray make illegal after-hours mutual fund trades, Bloomberg News reports.

Paul F. Roye, director of the Securities and Exchange Commission's division of investment management, announced Friday that he will be leaving the Commission to pursue opportunities in the private sector.

Investment bank Lazard has revealed that the Securities and Exchange Commission and NASD are investigating gifts and gratuities it gave and received. The company stated in the amended prospectus for its planned $850 million initial public offering that it had received a letter from the NASD as part of an industry-wide probe of gifts and gratuities.

Investors are diversifying and how. More than two-thirds of stock and bond net inflows in 2004 were part of a structured asset allocation program, according to research firm Strategic Insight.

Beginning next Monday, funds will begin complying with a new Securities and Exchange Commission requirement that they must disclose how they structure portfolio managers' compensation and how much these fund skippers have invested in the funds they oversee. Funds that launch after Feb. 28 must disclose the information in their registration documents, while existing funds must report the information in their annual prospectuses. The SEC rule aims to better align managers' interests with those of long-term shareholders. But the rule has its share of dissenters within the industry. James Riepe, vice chairman of T. Rowe Price and chairman of the Investment Company Institute, said the rule suggests that a portfolio manager or fund analyst only cares if they "have a significant investment in that fund." A few firms have started linking managers' pay to performance, including Janus Capital, which starting Jan. 1, is now tying portfolio managers' bonuses to one- and three-year performance.

In a move that may indicate investment advisors are rethinking their footing within the registered hedge funds-of-funds marketplace, Aspen Strategic Alliances (ASA) of Atlanta, advisor to four hedge funds-of-funds that commenced operations less than one year ago, will pull the plug on the funds, liquidate assets and return investments to investors.

Jim Stueve is a habitual "Crackberry" user and has no problem admitting his addiction.

As far as improving mutual fund distribution is concerned, consider the typical odds: the average asset manager's external wholesale team is made up of 40 individuals, and if they conduct roughly 20 meetings a week, they can reach about 8,000 financial advisers every quarter.

Workers saving for retirement through their companies' 401(k) plans may have a new tool at their disposal: Roth 401(k) accounts, which companies are likely to roll out next year. A Roth 401(k) works just like a Roth individual retirement account (IRA). Workers can put in after-tax amounts in the plan and withdraw contributions and earnings on those contributions tax-free at retirement. Regular IRAs, on the other hand, allow workers to deduct yearly contributions from their taxable income but require taxes to be paid when withdrawals begin.

Edward Jones is airing a 33-minute video to its six million clients across the country that outlines President Bush's plan for Social Security reform, but the brokerage giant stops short of publicly endorsing a specific solution. Titled "The Future of Social Security," the video features panelists discussing reform options, including the hotly debated private accounts. Other options the panelists discuss are increasing taxes and raising the retirement age.

RS Investments Promotes Davis to Portfolio Manager

Goldman Sachs Asset Management plans to expand its mutual fund business by acquiring small fund families from banks looking to quit the proprietary fund business.

More than a dozen major mutual fund providers and investment advisors have settled with federal and state regulators over market-timing and late-trading practices and set aside money to reimburse investors. For plan sponsors and administrators, the challenge is figuring out what role they will play in distributing millions from those settlements to employees. Because many plan sponsors are confused about how they should handle these settlements, fund administrators would probably earn the respect of these clients if they proactively keep them informed of developments.

The NASD may have initiated fewer disciplinary actions last year, but the size of its fines got a lot bigger, it pressed a record number of cases against improper fund sales and trading, and its interest in mutual fund sales practices will continue to be a priority in the coming year. The agency collected $102 million in fines, up from $33.3 million in 2003.