Oct. 28–The U.S. Securities and Exchange Commission and the Wisconsin Department of Financial Institutions are investigating recent allegations made against Strong Capital Management, according to acompany statement.

The Menomonee Falls-based company made the disclosures this month in documents prepared for investors in its mutual funds. In the documents, Strong said that Wisconsin and U.S. securities regulators were conducting inquiries into claims by New York Attorney General Eliot Spitzer that Strong had given a New Jersey hedge fund improper trading privileges in its funds.

“Strong is currently cooperating fully with the (New York Attorney General’s office, the Securities and Exchange Commission and the Department of Financial Institutions,) with respect to their separate inquiries into these matters,” the statement read.

The statement by Strong is the first clear confirmation that state and federal regulators are following up on Spitzer’s complaint. In a Sept. 3 settlement with Canary Capital Partners, Spitzer’s office alleged the hedge fund used its size to gain trading rights in five Strong funds, giving Canary an unfair advantage over other investors.

In its statement, Strong said that two days later, the Securities and Exchange Commission “began an inquiry based on matters related to, and set forth in, the (Spitzer) complaint.” On Sept. 24, the state Department of Financial Institutions asked Strong for “certain information and documents” relating to the complaint.

Information on these two inquiries was not included in a letter to Strong shareholders which was posted on the company’s Web site on Sept. 26 and which addressed issues surrounding the Spitzer complaint.

A spokeswoman for Strong, Stephanie Truog, said her company was continuing its internal review. “Please be assured that our actions related to this issue will be consistent with both our clients’ best interests and our fiduciary responsibilities,” Truog said.

Both the Securities and Exchange Commission and the Department of Financial Institutions declined comment.

“We can never confirm nor deny the existence of a formal investigation,” said Patricia Struck, administrator of the Division of Securities at the Department of Financial Institutions.

The statement by Strong also listed the eight federal and state courts where shareholders had brought suits against the company for allegedly failing to protect their interests or for giving misleading information in fund descriptions. Federal and state courts in Wisconsin, New York and New Jersey were named.

James C. Mentkowski, a Milwaukee lawyer representing a group of plaintiffs in the case, estimated that there were eight to 10 lawsuits pending against Strong in federal courts alone. Mentkowski said the plaintiffs in federal court will petition for class action status.

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(c) 2003, The Wisconsin State Journal. Distributed by Knight Ridder/Tribune Business News.