Strong Capital to be charged for improper trades
REUTERS[ SATURDAY, NOVEMBER 01, 2003 04:06:18 AM ]
NEW YORK : New York attorney general Eliot Spitzer expects to bring charges against mutual fund company Strong Capital Management, its founder Richard Strong, and possibly another employee as part of a probe into improper mutual fund trading, a spokeswoman said on Thursday.
Strong, listed as one of the 400 richest Americans by Forbes magazine, is the highest-ranking mutual fund industry executive to be targeted in a rapidly widening investigation into improper trading.
Strong and others close to him made as much as $600,000 over five years by making quick, in-and-out trades of his firm’s funds, the spokeswoman for Mr Spitzer said.
Those “market-timing” trades are aimed at exploiting arbitrage opportunities in the way funds are priced, and ordinary Strong investors are discouraged from making them. The practice also drives up costs for long-term investors.
The probe is still ongoing, the spokeswoman said, and it is unclear at this point what charges Mr Strong and the company face, though criminal charges have not been ruled out. Late in the day Mr Strong signalled he would be prepared to quit the firm if necessary. He also said he will reimburse Strong-advised funds for any financial losses investors suffered due to his transactions. “If it becomes appropriate, I would be prepared to step aside to enable new leadership to bring new energies to this company,” Mr Strong said in a statement.
A spokeswoman for privately held Strong Capital, which oversees $42.7bn in assets, Wisconsin, would not comment directly on the possibility of charges in the probe, but the company said it is investigating with the help of outsider.
Strong said it hired David Ruder, a former chairman of the SEC to review the company’s policies and procedures. Mr Ruder will oversee and advise the company on policies and procedures and will report and make recommendations to the soon-to-be expanded board, the company said. |
