Internal Emails Suggest Market-Timing at ING Since 2001

The emails from ING employees express concerns that the rapid trading from a few big clients was hurting returns for regular mutual fund investors, according to the WSJ.

Officials from the New Hampshire Bureau of Securities Regulation requested that ING Financial Advisors hand over e-mails and other internal reports, accusing the company of fraud (See NH Accuses ING of Fraud ). The state is charging ING with mishandling state employees’ 401(k) plan money by:

• delaying actions against market timing,
• moving retirement savings from a mutual fund into another garnering higher fees for ING without permission,
• making unwritten revenue sharing deals with other mutual fund companies, and
• failing to retain emails relating to the state’s charges.

According to the WSJ, an internal email showed concern over market timing activity that was affecting a fund, Janus Aspen Worldwide Portfolio, that was included in the New Hampshire plan. In August 2002, Laurie Tillinghast, a fund relationship manager for ING, wrote in an internal email to an unknown recipient that, for the second time in a few weeks, she had received “an urgent call” from a senior vice president at Janus Capital Group Inc. about a “market-timing pattern” by clients at Reliastar Life Insurance, an ING subsidiary.

The next month, she emailed Shaw McCabe, an employee at an ING service center, saying, “I’m asking if you can administer NO PHONE or Fax trades” for several market timers. McCabe responded to the email by saying, “there are a few issues that should be raised before we take this route…We have over $50,000,000 in what I would say are our high-profile market timing accounts. If we employ this strategy, I feel that much of this will leave.”

Related to the charge of revenue sharing deals, Kathleen Murphy, president of ING’s US retirement services, acknowledged to the WSJ that there was no disclosure to the New Hampshire plan about strategic-partner payments, but said the company never received “strategic partner revenue in relation to the New Hampshire plan.”

ING is also facing investigation from New York Attorney General Eliot Spitzer over retirement plan administration (See NY Retirement Fund in Payment Arrangement with Investment Company ). The New York State United Teachers union (NYSUT) union announced Tuesday that it has agreed to pay $100,000 and adopt a series of reforms to end the investigation into its practice of steering retirement investments to ING (See  NYSUT and NY Atty. Gen. Reach Settlement ).

Last year ING was ordered by the NASD to pay $2.9 million in a settlement of charges to market-timing violations (See ING Fined For Market Timing Violations ).