Federated Investors Inc. will take a $20 million charge on fourth-quarter earnings to establish a fund for investors and pay for an internal review of mutual fund trading practices, the companyannounced Tuesday.<\/p>\n
Federated also said it had punished three officers, two money managers and fired an employee for improper trading. The Pittsburgh-based fund said it is setting aside $7.6 million to pay for any damages to funds or shareholders caused by the trades.<\/p>\n
Additionally, the company acknowledged that two portfolio managers made personal trades in 401(k) funds they managed, but said the fund did not suffer as a result.<\/p>\n
The disclosures follow the company’s announcement in November that a small number of employees had improperly accepted more than 100 illegal, after-hour trades and that two officers were involved in an arrangement that allowed hedge fund operator Canary Capital LLC to market time Federated’s domestic funds 46 times over a five-month period.<\/p>\n
Canary Capital agreed to a $40 million settlement with regulators last year following allegations it engaged in late trading, which is illegal, and market timing. Market timing, a type of quick, in-and-out trading, is not illegal but discouraged by many funds companies – including Federated – because it skims profits from other shareholders. Regulators have indicated that funds which restricted market timing but made exceptions for some clients committed fraud.<\/p>\n
Federated has not been charged with any wrongdoing.<\/p>\n
Also Tuesday, Federated said that employees had been accepting after-hour trades for more than four years, potentially allowing trades using the previous day’s prices.<\/p>\n
One employee placed orders ranging from less than $100 to $26,000 between January 1999 and March 2003, Federated said.<\/p>\n
The employee has been fired, Federated said.<\/p>\n
Late trades by employees had no “material impact” on the funds and accounted for a fraction of 1 percent of total orders processed, the company said.<\/p>\n
The company is still in the process of determining how much the improper trades cost shareholders. Reimbursement for those costs will come out of the $7.6 million fund.<\/p>\n
The charge to fourth-quarter earnings does not include potential fines by regulators or lawsuits. Eight civil lawsuits have been filed against Federated related to the trading.<\/p>\n
Separately, the company said it is spending $12.4 million to review its trading practices, including a contract with Cornerstone Research which will assess the impact of improper trading on its funds.<\/p>\n
“During the course of the review, Federated identified deviations from our standards and procedures,” company president and chief executive J. Christopher Donahue wrote in a letter to shareholders Tuesday. “These deviations are contrary to the Federated culture and the ethics that we have made a cornerstone of the company throughout our history and we regret their occurrence.”<\/p>\n
An SEC spokesman declined to comment on whether Federated was being investigated.<\/p>\n
Shares of Federated closed up 71 cents at $31.91 on the New York Stock Exchange.<\/p>\n
—<\/p>\n
On the Net:<\/p>\n
http:\/\/www.federatedinvestors.com<\/p>\n","protected":false},"excerpt":{"rendered":"
Federated Investors Inc. will take a $20 million charge on fourth-quarter earnings to establish a fund for investors and pay for an internal review of mutual fund trading practices, the companyannounced Tuesday. Federated also said it had punished three officers, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2274","post","type-post","status-publish","format-standard","hentry","category-hedgeco-news"],"_links":{"self":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/2274","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=2274"}],"version-history":[{"count":0,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/2274\/revisions"}],"wp:attachment":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=2274"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=2274"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=2274"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}