Alliance Offers to Cut Fees 20%

Alliance Cap Mgmt Holding L.P. (AC) has offered to reduce its mutual fund management fees by 20% for the next five years, saving investors an estimated $350 million, as part of its plan to settle allegations that it allowed improper trading of its funds, according to people familiar with the matter.

The unprecedented fee reduction, negotiated with the New York attorney general’s office, would come on top of the $250 million fine that Alliance Capital is expected to agree to pay to settle civil fraud charges the company could be facing, people familiar with the negotiations say. As reported, that fine, which would be the largest ever levied against a mutual-fund company. It would include restitution to shareholders harmed by the improper fund-share trading and disgorgement of fees the firm earned while permitting the improper trading. A spokesman for Alliance declined to comment.

A final agreement to settle allegations by New York and the SEC, which would also include a number of structural changes in the way Alliance funds are run, is likely to be announced this week, according to people familiar with the negotiations.