In a news release, the companies said the settlement talks were ongoing with the Securities and Exchange Commission (SEC), New York state Attorney General Eliot Spitzer, the New York Stock Exchange (NYSE) and the Illinois Secretary of State’s office, and that a conclusion could come early this year.
The $134 million would include required disgorgement, penalties, and investor education contributions. It would include $127 million to be distributed to Scudder Funds shareholders.
The companies were hit with allegations that they allowed market timing in the Scudder Funds and did not take sufficiently strong measures to prevent the abusive trading practices during the 1999 to 2001 period, according to the news release. DeAM said it anticipates that a final regulatory order will refer to one DeAM market timing arrangement as well as three Scudder and six Kemper arrangements.
The announcement asserted that all of these trading arrangements originated in businesses that existed before the current DeAM organization, which came together in April 2002 as a result of the mergers of the legacy Scudder, Kemper and Deutsche Fund groups. The companies claimed that all of the arrangements were stopped before the start of the regulatory investigations that began in July 2003 and that no current DeAM employee approved the trading arrangements.
Meanwhile, Deutsche Bank Securities said its charges related to a former DBSI Client Advisor who conducted market timing business through DBSI and, in connection with that Client Advisor’s business, accepted late trades as well.
Finally, DeAM said in the announcement that is also engaged in settlement discussions with the enforcement staffs of the SEC and the NASD regarding DeAM’s practices during 2001-2003 with respect to directing brokerage commissions for portfolio transactions by certain Scudder Funds to broker-dealers that sold shares in the Scudder Funds and provided beefed up marketing and distribution for shares in the Scudder Funds. In addition, on January 13, 2006, Scudder Distributors, Inc. received a Wells notice from the Enforcement Staff of the NASD regarding Scudder Distributors’ payment of non-cash compensation to associated persons of NASD member firms, as well as Scudder Distributors’ procedures regarding non-cash compensation regarding entertainment provided to such associated people.
Also in the announcement, DeAM announced that the Scudder Funds have submitted for review by the SEC proxy statements soliciting approval from the Scudder Funds’ shareholders of various proposals, including changes to the Scudder Funds’ organization documents, investment advisory agreements, fundamental investment restrictions, consolidation of certain Scudder Funds’ Boards of Directors, and fund mergers.