Conseco, Inviva Settle With SEC Over Market Timing Charges
Conseco Inc. and Inviva Inc. agreed to pay $20 million to settle regulators charges that they helped market timers make big profits on their variable annuities at the expense of individual investors.
Neither company admitted any guilt in the matter but acknowledged agreeing to settle.
The 2 companies were the first insurers to be charged by the Securities and Exchange Commission in the recent market timing scandal.
New York Attorney General Eliot Spitzer was also involved in the settlement.
The SEC charged both companies with securities fraud for facilitating market timing of mutual funds through the sale of their variable annuities.
The charges covered Conseco subsidiaries CIHC Inc., Conseco Services LLC and Conseco Equity Sales Inc. as well as Inviva and its subsidiary, Jefferson National Life Insurance Company.
Inviva, New York, is the company to which Carmel, Ind.-based Conseco sold its VA business in 2002, shortly before it filed for bankruptcy. Conseco emerged from bankruptcy in September 2003.
In market timing, large investors such as hedge funds buy and sell shares of the same funds frequently to exploit lags in price movements in the market.
While not illegal in itself, market timing can cause other shareholders to bear the costs of the timers price juggling and thus can dilute the value of their shares, the SEC argued.
The question of fraud arose because the 2 VA carriers never discussed these arrangements with the underlying funds nor to individuals buying their annuities, the SEC charged.