Administration March 12, 2004

Alliance Settlement Could be "Split" Decision

December 15, 2003 (PLANSPONSOR.com) - Published reports indicate that settlement talks between Alliance Capital Management and regulators are intensifying - and a settlement could come as early as this week.

Reported by

Nevin E. Adams

CBSMarketWatch notes that Alliance has offered to reduce management fees for fund shareholders in an attempt to stave off charges from New York Attorney General Eliot Spitzer’s office related to improper fund trading – but notes that other issues, including possible penalties and the structure of any settlement, must still be resolved, citing persons close to the situation (see Alliance Capital Proposes Fee Cut as Part of Settlement with Spitzer ).

Reports say that Spitzer wants New York-based Alliance to promise it will cut the fees it charges investors as part of the deal, but the SEC reportedly opposes this approach, viewing it as unrelated to trading – and a matter best left to their own rule-making.

The Securities and Exchange Commission, which will likely be involved in a joint settlement, was believed to have gathered Thursday in a closed meeting to consider the Alliance proposal, according to published reports.

“We have been in discussions with Alliance and in consultation with the Securities and Exchange Commission regarding possible settlement,” Paul Laraby, spokesman for New York Attorney General Eliot Spitzer in Albany, told Reuters. That same report noted that SEC Commissioner Roel Campos, who refused to specifically discuss Alliance, said that conceptually, “To argue that fees are somehow related to market timing is like saying, well, in any business crime, I can go anywhere.” Campos, a former federal prosecutor, told Reuters, “We believe that disclosure, in some light, is the way to deal with these things. In January and February, we’re going to be doing extensive rule-making in this area.”

Meanwhile, on Friday, North Carolina said it has completed the first part of its probe of Alliance, and expressed confidence that Alliance’s portfolio managers and analysts responsible for North Carolina’s accounts (some $6.2 billion worth) “were continuing to perform their responsibilities in a diligent and unimpeded fashion.” (see Alliance Passes First Tar Heel State Review ). Oregon currently has the mutual fund firm on its watchlist, as does the Indiana State Teachers’ Retirement Fund. Alliance manages about $3.3 billion for Oregon, and about $2 billion for the Indiana fund.