RS Investments Settles over Market Timing Allegations

October 6, 2004 ( - New York Attorney General Eliot Spitzer has scored another point in his probe of the mutual fund industry with a $25-million settlement with investment advisor RS Investments over market timing charges.

The San Francisco-based firm will pay $11.5 million in restitution and disgorgement to investors, as well as $13.5 million in civil penalties, according to Reuters. The firm will have to also lower its management fees by $5 million over a five-year period.

The Securities and Exchange Commission stated that RS Investments’ chief executive, Randall Hecht, and former CFO, Steven Cohen, were charged with allowing certain investors to conduct market timing in certain funds.

According to Spitzer, the practice of rapidly trading in mutual funds at RS Investments came to his attention during its investigation of hedge fund Canary Capital Partners last summer. The investigation of Canary is commonly considered to be the start of the ‘mutual fund trading scandal’. Over $3 billion in penalties has been levied against industry players for late trading and market timing abuses.

RS Investments has been under investigation since March, according to Reuters, and has agreed to implement significant corrective measures with the goal of greater accountability and to prevent future abuses (See Regulators Focus on RS for Market Timing ).

RS Investments managed about $5 billion in assets at the end of last year.