Administration February 3, 2004

Regulators Focus on RS for Market Timing

March 2, 2004 (PLANSPONSOR.com) - The latest financial services firm to feel the steely eyes of federal and state regulators upon it for its mutual fund trading practices is apparently a San Francisco-based company.
Reported by

RS Investments said in a US Securities and Exchange Commission (SEC) filing that the SEC’s staff has made a preliminary determination to bring civil enforcement action against it over market-timing in its flagship $1.6 billion RS Emerging Growth Fund, according to the Associated Press.

New York State Attorney General Eliot Spitzer’s is also investigating RS Investments. The firm said it is discussing the matter with the SEC and Spitzer’s office.

Morningstar analyst Chris Traulsen said in a recent report that the Emerging Growth fund’s prospectus doesn’t place any limits on an investor’s ability to trade its shares. He noted that the firm’s policy was to permit trading in the fund by existing shareholders as long as it wasn’t “disruptive.”

RS was founded in the early 1980’s as a subsidiary of investment bank Robertson, Stephens & Co., but has been on its own since 1999. It offers 10 mutual funds and manages about $7.2 billion in assets. RS Investment Management, L.P. is the investment advisor to RS Investments mutual funds.

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