Janus will pay $50 million in restitution to investors and $50 million in civil penalties, and will reduce the fees it charges investors by $125 million over five years. The deal was announced jointly Tuesday by the attorneys general of Colorado and New York.
Under the terms of the agreements in principle, Janus also will make $1.2 million in other settlement-related payments required by the state of Colorado. Specific fee reductions on a fund-by-fund basis will be determined by the independent trustees of the respective Janus funds in consultation with the New York Attorney General’s office, according to Janus.
The settlement is the fourth-largest to be reached in the probes that have rocked the fund industry. Four other companies have agreed to pay $1.7 billion in penalties, specifically:
- $675 million – Bank of America-FleetBoston (see BofA, Fleet Come to Terms with Spitzer, SEC in Fund Probe )
- $225 million – MFS (see MFS Scandal Settlement Finalized )
- $600 million – Alliance Capital Management (see Alliance, Regulators Reach Settlement )
- $110 million – Putnam (see Details Emerge About Putnam Settlement )
Additionally, a handful of chief executives, including Janus’s CEO last week (see Janus CEO Whiston Steps Down ) have resigned because of the scandal.
The Denver-based fund firm had previously had said it was in settlement talks with the Securities and Exchange Commission, the New York Attorney General, the Colorado Attorney General and the Colorado Securities Commissioner (see Janus, Colorado in Settlement Talks ). Janus was one of the first firms to be named in the trading scandal (see Spitzer Fund Abuse Probe Pumps Out More Subpoenas ).
The $225 million settlement dwarfs Janus’ previous estimate of the harm that its fund shareholders had suffered as a result of the rapid trading. Late last year, Janus agreed to reimburse $31.5 million to its funds to compensate investors (see Janus Paying $31.5 Million For Market-Timing Activities ).