Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Portfolio > Alternative Investments > Hedge Funds

Alliance Capital Agrees to Pay Fine, Change Ways to Atone for Allowing Market Timing

Your article was successfully shared with the contacts you provided.

NEW YORK (–Alliance Capital Management LP on Thursday struck a deal with the U.S. Securities and Exchange Commission and New York Attorney General Eliot Spitzer’s office, agreeing to pay a US$250 million fine, lower its fees by 20% and freeze fees at that lower level for at least five years to make amends for allowing broker-dealers and hedge funds to market time its mutual funds.

The agreement, announced jointly by the SEC and Mr. Spitzer’s office, also stipulates that Alliance will take steps to prevent future market timing of its mutual funds.

The fine and subsequent fee reduction together amount roughly to a US$600 million penalty against Alliance, which manages some US$460 billion in assets. SEC officials said the fines would be returned to shareholders hurt by market timing.

It was the largest ever penalty paid by a mutual fund adviser, according to a statement from SEC Division of Enforcement Director Stephen M. Cutler.

According to a statement from Mr. Spitzer’s office, a joint investigation by the New York Attorney General and the SEC found that senior Alliance Capital officials had allowed market-timing arrangements with 18 broker-dealers and hedge funds. In return, those broker-dealers and hedge funds agreed to invest assets in Alliance Capital mutual funds. Those additional assets generated more fees for the company.

Among the reforms Alliance Capital officials agreed to is hiring a senior officer to monitor and ensure mutual fund fees are “negotiated at arm’s length and are reasonable,” according to a statement from Mr. Spitzer’s office. Alliance Capital also agreed to require the company’s chairman to be independent, without prior connection to the company.

[email protected]


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.