Reform measures were laid out by Janus in a “progress update” with the US Securities and Exchange Commission (SEC) today. Additionally, the company said it has had preliminary discussions with New York Attorney General Eliot Spitzer and the SEC to settle issues related to fund trading, according to a Reuters report.
Among the reform measures taken by the Denver-based company:
- Hiring Marianne Smythe , a partner at the law firm of Wilmer Cutler & Pickering and a former Director of the SEC’s Division of Investment Management, to review Janus policies.
- Tightening internal policies “to remove any room for possible misinterpretation about our policies related to frequent trading.”
- Disclosing mutual fund portfolio holdings monthly, instead of twice a year, starting at the end of the 2003.
- Raising short-term redemption fees In the 14 funds that impose such fees to 2% from 1% on shares sold within 90 days of purchase. The company is considering adding short-term redemption fees to funds that do not already have them.
Newly named Janus Capital Chief Executive Mark Whiston also announced in the SEC update thatJanus has no agreements allowing investors or clients to buy fund shares after market close and obtain that day’s closing price and that no evidence has been found that any investor or client placed a late-day trade directly with Janus, according to a Dow Jones report .
News of the reform comes after Janus International’s chief executive Richard Garland resigned yesterday, after an e-mail exchange between Garland and an unnamed Janus employee surfaced pointing to market-timing activities being knowingly conducted at the firm. In the e-mail message, the unnamed employee noted “We need to keep our funds clean,” to which Garland replied, “I have no interest in building a business around market timers, but at the same time I do not want to turn away $10-$20m!”
In fact, after learning that the deal could bring in as much as $50 million,Garlandapproved the additional market-timing capacity onApril 3, 2003, in a deal that was never finalized. Garlandwill be replaced by Erich Gerth, previously national sales director of Janus Global Adviser, who joined the company in July from Goldman Sachs Asset Management.
Janus’ market-timing activities were previously disclosed in an SEC filingafter Janus conducted an internal review (See Janus Unearths Market Timing Arrangements). In the earlier filing the company said it found “significant, frequent” trading appeared to have occurred in four of the 12 market timing arrangements discovered between the firm and its institutional clients.