Chung’s move follows the plea by James Connelly Jr., Alger’s former chief mutual fund officer, to tampering with physical evidence and his agreement to pay a $400,000 civil penalty to settle related charges by the US Securities and Exchange Commission (SEC). Connelly was accused of deceiving his firm’s lawyers by withholding documents and directing employees to delete some e-mail sought in a subpoena.
He was also accused of trying to conceal trading arrangements between his firm and Veras Investment Partners, a Texas hedge fund. The SEC said in a news release that Connelly allowed more than a dozen select investors to ”time” trades in Alger funds, a practice the company did not disclose in fund prospectuses. In return, the investors agreed to keep substantial assets in Alger funds.
Before his plea, Connelly and two other mutual fund sales employees at an Alger subsidiary were suspended on September 29 for late-trading activities.
“The industry wide issues involving market timing have yet to be fully resolved by regulators and the industry. We understand that the SEC is in the process of setting new standards on market timing in the form of proposed regulations,” Chung said in a letter posted on the firm’s web site. “We look forward to seeing those proposed regulations. Regardless, we at Alger understand our clients’ concerns and have already taken action. Effective immediately, we will not permit market timing in our funds.”
The SEC and New York State Attorney General Eliot Spitzer have been investigating whether numerous fund firms and other financial services companies were involved in improper mutual fund trading.
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