Janus Unearths Market Timing Arrangements

November 13, 2003 (PLANSPONSOR.com) - Janus Capital Groups Inc. has divulged 12 arrangements that allowed for market timing across its domestic mutual fund business.

The revelation was made in a Securities and Exchange Commission (SEC) filing after Janus conducted 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 that “significant, frequent” trading appeared to have occurred in four of the arrangements, according to a Reuters report.

No doubt feeling the heat from the intense scrutiny on the market-timing arrangements – the practice of rapidly trading in and out of mutual funds to take advantage of inefficiencies in the market – Janus also revealed the arrangements were terminated at the September, resulting in an outflow of $314 million.   “At their peak these arrangements accounted for approximately one quarter of one percent of total assets under management,” Janus said in the filing.

The impact of market timing in Janus funds could potentially be larger.   In addition to the disclosure of the dozen arrangements, Janus said there might have been several frequent trading arrangements in its offshore mutual fund business.   Further, this arm of the firm’s business may also have allowed late trading in its funds – the illegal practice of allowing mutual fund buy/sell orders to be placed after the 4 p.m. market close.

Additionally,Janus said that financial intermediaries may have submitted improper or unauthorized late trade transactions to Janus in violation of their agreements with the mutual fund company.