DENVER (AP) – The Colorado attorney general announced Thursday that he is in settlement talks with Janus Capital Group Inc. over improper mutual fund trading in a scandal that has swept the industry.
Attorney General Ken Salazar said he would delay filing a formal complaint against Denver-based Janus because the company is moving ahead with reforms and is eager to address concerns raised by state and federal regulators.
“I believe that there is a sound basis for us to move forward with formal action against Janus,” he said. “However, I am also persuaded that Janus is attempting to move forward in good faith to resolve issues concerning market timing in its mutual funds.”
Janus is cooperating fully with Salazar’s office, spokeswoman Jane Ingalls said.
“We appreciate his recognition of our good faith efforts, and we’re committed to working with all regulators until this matter is satisfactorily resolved,” she said.
Janus has been under scrutiny since at least September, when New York Attorney General Eliot Spitzer announced a settlement with Canary Capital, a hedge fund accused of having improper trading agreements with Janus and three other fund groups.
Janus was not charged, but Spitzer said Janus allowed short-term trades, or market timing, even though its policies discouraged it.
Market timing is not illegal but involves quick trades that can lead to profits at the expense of long-term mutual fund shareholders.
The practice has prompted regulatory scrutiny involving dozens of other fund companies, including Denver-based Invesco Funds Group, Putnam Investments, Strong Financial and Prudential Securities.
Regulators have charged Invesco and its chief executive with civil fraud, saying the company set up a system to recruit big-money market timers despite complaints from its own employees that shareholders were being harmed. On Thursday, Alliance Capital Management agreed to a $600 million settlement to resolve accusations it permitted market timing in its funds.
Janus has said it had 12 arrangements that allowed market timing and that the practice occurred under four of those arrangements. At their peak, the trades involved 0.25 percent of assets under management. Janus has pledged to pay back affected shareholders.
Salazar said his office was working with Spitzer and the Securities and Exchange Commission. He said allegations would have included false representation and a failure to disclose material facts to fund shareholders.
Other agencies that have requested information from Janus include the Colorado Division of Securities and the National Association of Securities Dealers, the brokerage industry’s self-policing group.
Janus shares closed up 43 cents at $14.83 Thursday on the New York Stock Exchange.
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On the Net:
Janus: http://www.janus.com
Salazar’s office: http://www.ago.state.co.us
