Janus, Colorado in Settlement Talks

February 17, 2004 (PLANSPONSOR.com) - Janus Capital Group appears to be close to reaching some kind of rapprochement with regulators for its role in the mutual fund trading imbroglio.

The Colorado Securities Division on Friday formally announced that it had begun an investigation of Janus Capital Group Inc. on market-timed trades at the fund company and that the two sides had undertaken talks to settle the case.   However, Colorado state securities commissioner Fred Joseph told Reuters that details about negotiations cannot be released.  

He added that settlement talks were started before initiating formal proceedings because Janus was cooperating in the investigation and was willing to address the problems.   He also noted that generally state regulators want Janus to stop unlawful conduct, install corrective measures, and provide restitution to investors, according to the report.  

Janus Actions

Last month Janus Chief Operating Officer Girard Miller mentioned the possibility of Janus adding early redemption fees to some of its funds to discourage market timing (see  Janus May Tack on Fund Fees ).   He also told attendees at a New York conference that investors have responded well to the company’s decision to pay back customers $31.5 million gained from improper trading, a move the Denver-based company announced in December (see  Janus Paying $31.5 Million For Market-Timing Activities ).  

However, that determination may not be enough for regulators.   “The division understands Janus has offered restoration in the amount of $31.5 million; however, in light of the division’s investigation, this amount may be inadequate,” Joseph said, according to the Reuters report.

Janus divulged 12 arrangements that allowed for market timing across its domestic mutual fund business in a Securities and Exchange Commission (SEC) filing in November following an internal review.   Janus, which had been named in a complaint by New York Attorney General Eliot Spitzer as having allowed hedge fund Canary Capital to engage in market timing in certain Janus funds (See  Spitzer Fund Abuse Probe Pumps Out More Subpoenas ), said at the time that “significant, frequent” trading appeared to have occurred in four of the arrangements.

Colorado authorities began their investigation of Janus in October not long after New York officials launched a probe into mutual fund trading practices.