Janus Capital Group said Friday it will pay $31.5 million to make up for previously disclosed market-timing arrangements in its mutual funds. It has not been determined whether the money will go tothe seven funds affected by the market timing or directly to the shareholders in those funds.
The money includes: $22.8 million in net gains realized by market timers; $2.7 million of opportunity cost of those gains had they been available to the funds; $1 million of related fees; and $5 million of waived redemption fees. It does not include any penalties that Janus might be required to pay.
Market timing involves frequent trading, often in international funds to exploit ”stale” prices due to time differences. It is legal but might violate fund rules. It can give market timers a profit at the expense of long-term shareholders.
In September, New York State Attorney General Eliot Spitzer settled charges with hedge fund Canary Capital Partners that it engaged in trading irregularities with Janus, Strong Financial and the mutual fund arms of Bank of America and Bank One.
Janus hired Ernst & Young to review its trading practices. The accounting firm found that 10 investors were allowed to trade in certain Janus funds more frequently than was normally allowed for other investors.
Janus also announced that independent director Steve Scheid will become non-executive chairman; CEO Mark Whiston will waive his right to become chairman. His 2003 bonus formula will be cut, and he will get it in stock, not cash.
