Compliance

The Securities and Exchange Commission has charged RS Investment Management, CEO Randall Hecht and Steven Cohen, former chief financial officer, with allowing certain mutual fund investors to market time the firm's funds. These investors profited from the trades, potentially at the expense of other shareholders, and RSIM was able to earn "substantial advisory fees."

In a year filled with securities industry scandals and settlements, the Securities and Exchange Commission has uncovered a new source of potential conflicts of interest. It could be yet another reason to expand the already overwhelming number of disclosures required of investment advisors and broker/dealers.

Having watched a number of mutual fund companies mishandle inquiries from securities regulators for the past 12 months, fund-tracking firm Morningstar knew what to do when faced with its own brush with the law.

A new bill banning the sale of a certain type of mutual fund on military bases drew unanimous support from a House panel Wednesday, as lawmakers look to protect young American troops from shady sales practices and ill-suited investment products.

The National Association of Securities Dealers has widened its inquiry into sales of 529 plans by investment advisors and brokers, more than tripling the number of firms under scrutiny to 20. The regulator began its fact-finding investigation in June of 2003 with an analysis of six large broker/dealers.

As significant federal regulation passed earlier this year begins to take effect, industry professionals are seeking greater guidance from the Securities and Exchange Commission on specific reporting mandates and examining the benefits of implementing optional requirements.

Canadian regulators announced potential enforcement proceedings against four of the largest Canadian mutual fund companies last week, as the fund industry market-timing scandal expanded north of the border.

Daniel Calugar strikes again. If there is one name you don't want in your client book of business, aside from Eddie Stern, it is Calugar's. For the second time this summer, Franklin Resources has paid for its dealing with the mysterious Las Vegas investor.

DALLAS -- Separately managed accounts, now with a combined $529 billion in assets under management, appear headed for a more stringent regulatory landscape. While the tax-efficient investment vehicles geared toward the high net worth have enjoyed tremendous growth in the last five years with little agitation from regulators, the industry sees rougher terrain ahead.

Putnam Investments on Thursday made a "groundbreaking commitment" to provide retail investors much of the same information institutional clients often demand, according to an announcement by the firm, the California State Treasurer, and pension groups CalPERS and CalSTRS.

The Securities and Exchange Commission has issued an adopting release that formalizes an amendment to Rule 12b-1 that prohibits funds from selecting broker/dealers for portfolio transactions based upon their sales of mutual funds. Fund companies must comply with the order by Dec. 13. Funds are not banned outright from choosing a broker/dealer that sells its funds to execute portfolio trades. Instead, the SEC requires that funds ensure selling agreements do not influence that decision.

Three firms affiliated with PIMCO equity funds agreed to pay $50 million to settle fraud charges related to a market-timing scheme that bilked long-term shareholders.

Charles Schwab & Co. agreed last Tuesday to pay $350,000 to settle charges that it improperly permitted investment advisor customers to alter mutual fund orders after the closing bell.

NEW YORK -- Using 12b-1 fees to pay brokers for selling mutual funds has morphed the fund business into a massive marketing machine, a development that has sparked controversy over the best way for fund companies to finance distribution.

The Securities and Exchange Commission said it would forge ahead with a new rule effective January 2006 requiring 75% of mutual fund boards to be comprised of independent directors and overseen by an independent chairman. The U.S. Chamber of Commerce sued the SEC on Sept. 2, charging that it had overstepped its rulemaking authority.

Amvescap, the London-based parent of Invesco Funds and AIM Advisors, said last week it has agreed to a $451 million settlement with several regulators, including $75 million in reduced fees, to resolve charges of improper trading activity by the sister shops.

What a difference a year makes.

Three former Invesco executives agreed to pay a combined $340,000 in fines to settle enforcement actions for their role in a market-timing scheme that allowed preferred clients to make excessive trades in exchange for sticky assets.

The long-awaited and much maligned deadline for mutual funds to disclose how they vote their proxies came and went last week as investors for the first time were given a peek at decisions on such matters as executive compensation and boardroom elections.

The Securities and Exchange Commission filed civil charges against broker/dealer National Clearing Corp. (NCC) and its parent company, JB Oxford Holdings (JBOH), for allowing customers to engage in late trading and improper market-timing activities. According to the SEC complaint filed in the U.S. District Court of Los Angeles, each of the defendants facilitated thousands of market-timing and late trades in more than 600 mutual funds between June 2002 and Sept. 2003.