Report: Whiston Aware of Market Timing Before Current Investigation

March 26, 2004 ( - Janus Capital Group Inc has said steps were taken to deter improper trading in the firm's mutual fund almost a year before regulators began investigating the firm.

This disclosure comes as CBS MarketWatch is reporting Janus is in settlement talks with regulators about market timing in some of its funds.   On Thursday it was reported that New York Attorney General Eliot Spitzer was expected to reach a settlement with Janus within a few weeks.

Under the terms of the settlement, reported by CBS MarketWatch, the penalty is expected to be less than the $600 million in fines and fee cuts recently imposed on Alliance Capital (See Alliance, Regulators Reach Settlement ).   However, the rumored settlement would also include a requirement that Janus head Mark Whiston resign because an internal Janus memo shows that he and other senior managers knew about the trades in November 2002, well ahead of the current market timing and late trading investigation that began in September 2003. 

While there is no suggestion in the memo that Whiston encouraged market timing the report, citing a person familiar with the negotiations, CBS MarketWatch said Whiston may be asked to leave because he did not do enough to stop the trades.   Overall, the alleged market timing of Janus funds amounted to slightly less than 1% of daily flows, the CBS MarketWatch report found.

Prior to the latest release, Janus, one of the first mutual fund firms named in the expanding fund trading scandal, divulged 12 arrangements that allowed for market timing across its domestic mutual fund business in a U.S. Securities and Exchange Commission (SEC) filing last November following an internal review (See  Janus, Colorado in Settlement Talks ).