ING disclosed the investigation’s results in a regulatory filing , which also insisted that the discoveries did not represent a widespread problem. ING said in the US Securities and Exchange Commission (SEC) document that its internal probe was sparked by demands from regulators in 2003 for information about possible late trading and market timing problems. ING said regulatory probes continue of trading arrangements it uncovered through the review.
“We remain convinced the small number of isolated instances we identified – which occurred for the most part in companies before ING acquired them – do not represent a systemic problem in any of the legacy companies that were involved, or in ING US today,” said Fred Hubbell, chairman of Insurance Americas and a member of the executive board of ING Group, in a news release.
The disclosure comes soon after Morningstar was critical of ING in a statement posted on the Morningstar Web site for not being more forthcoming with details of its findings and recommended investors delay investing in ING funds.
In its latest update on the situation, ING identified the five instances of problem trades as:
- A practice with ReliaStar Life Insurance Company – acquired by ING in 2000 – that allowed the owner of seven ReliaStar variable life insurance policies to engage in frequent trading and to submit trade orders until 4 p.m. Central time instead of by the 4 p.m. Eastern time market close. ING said it didn’t think the customer realized ill-gotten profits from the late-trading aspect of the arrangement. The firm terminated or otherwise disciplined employees, ING said.
- In 1998, then-employees of Golden American Life Insurance Company agreed with a broker-dealer that permitted the firm to frequently trade up to certain specific limits in a fund available through a Golden retail variable annuity product. No employee responsible for this arrangement remains at the company, ING said.
- In 1998, then-Pilgrim Funds worked out a written deal with a broker that allowed the broker to frequently trade in Pilgrim Funds up to specified limits. Dating from 1995 or 1996, Pilgrim also had informal, oral arrangements with two brokers that permitted frequent trading. Pilgrim Funds were acquired by ReliaStar in 1999. Several employees were disciplined in connection with this matter.
- In 2001, ReliaStar hammered out a selling agreement with a broker-dealer that had previously utilized frequent trading strategies with its clients. Then-senior management instructed Reliastar employees to make sure that written trading limits were imposed on this broker-dealer. However, despite these instructions, limits were not imposed as ordered and the broker-dealer subsequently engaged in frequent trading. Employees were terminated and/or disciplined in connection with this matter.
- One investment professional associated with Aeltus Investment Management, Inc. engaged in extensive frequent trading in ING Funds. Aeltus was acquired by ING in 2000. In 2001, certain frequent trading by the professional was identified by his superiors, and he was told to stop such trading and he temporarily did so. However, he resumed his frequent trading in ING Funds in 2003. He was terminated for cause and also fined. Another investment professional engaged in more limited frequent trading in other ING Funds and was disciplined as a result – and is no longer with the company, according to the ING disclosure.