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Regulation and Compliance > Federal Regulation > SEC

SEC Asks Phoenix For Market-Timing Analysis

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A Hartford insurer says federal regulators are asking for information about whether market timing might have affected its customers.[@@]

The company, Phoenix Companies Inc., says in the legal proceedings section in a 10-K annual report filed with the U.S. Securities and Exchange Commission that the Boston office of the SEC has issued Phoenix a “deficient letter.”

The letter focuses on perceived weaknesses in procedures for monitoring trading to prevent market-timing activity, Phoenix says.

“Market timing” can have several meanings. In recent months, SEC investigators have been using the term to refer to the practice of speculators engaging in rapid trades to take advantage of inefficiencies in the spread of share price data and other important information.

The SEC staff has “requested the company to conduct an analysis as to whether shareholders, policyholders and contract holders who invested in the funds that may have been affected by undetected market timing activity had suffered harm and to advise the staff whether the company believes reimbursement is necessary or appropriate under the circumstances,” Phoenix says in its 10-K filing.

“A third party has been retained to assist the company in preparing the analysis,” Phoenix says. “Until this analysis is completed, whether any of these affiliates of The Phoenix Companies Inc. would be required to make any reimbursement payments and if so the amount thereof cannot be determined.”

Phoenix notes that it also has received a subpoena from the Connecticut attorney general’s office about “certain distribution practices since 1998.” “Over 40 companies received such a subpoena,” Phoenix says. “We are cooperating fully.”

No regulatory agency has initiated settlements of enforcement actions against Phoenix, but “it is possible that one or more regulatory agencies may pursue this type of action against us in the future,” Phoenix says.

Phoenix says it does not believe any of the regulatory actions will affect its financial condition, but it notes that litigation is inherently unpredictable and that adverse outcomes could affect the company’s operations or cash flows.


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