Hartford Agrees to Market Timing Compensation with Mutual Funds

March 1, 2005 (PLANSPONSOR.com) - The Hartford Financial Services Group has disclosed that is has reached an agreement in principle to compensate its mutual fund investors for harm caused by market timers.

According to a federal filing, The Hartford reached the agreement with the board of directors of the mutual funds; however, the terms of the indemnification have not been determined, according to the Hartford Courant.

The Hartford’s mutual funds can be bought by separate accounts for some insurance policies and certain annuity products, and are offered to certain retirement plans directly, according to the paper. Some of their older products – such as older variable annuities – do not restrict frequent trading, a situation that can lead to market timing.

The company had previously said that it would likely face enforcement action by regulators over charges of market timing in its mutual funds. Also a likely target would be “directed brokerage”, in which funds direct their trades to certain brokers to reward large sales of the funds, according to the Courant. The company said that in 2003, it discontinued this practice.

Also noted by the company that it is likely that most, if not all, of the lawsuits pending against the company stemming from a probe into the industry will be transferred to federal court in New Jersey, the Courant is reporting. The Hartford was named, but was implicated, in New York Attorney General Eliot Spitzer’s insurance industry probe, according to the paper (See Spitzer Probing Insurance Companies ).