SEC Examines Wellington Trading Practices

May 26, 2004 ( - The U.S. Securities and Exchange Commission (SEC) is investigating trading practices at Wellington Management Company, a firm's whose ties to the Vanguard Group could bring that company under regulatory scrutiny as well.

The SEC informed Wellington of the investigation into the money management firm’s trading practice and procedure, the New York Times is reporting.   However, a Wellington spokesperson did not believe the SEC investigation had to do with market timing and late trading.   Further details into the investigation were not provided in the Times’ coverage.

While details of the Wellington investigation are few and far between, a broad SEC probe of Wellington’s trading practices could touch a tremendous number of Wall Street investment firms.   The Boston-based firm’s client roster includes 95 mutual fund companies, perhaps none more visible than Vanguard, for which Wellington acts as the investment advisor to 13 Vanguard Funds with $100 billion in assets.

In turn, any possible Vanguard involvement in a trading scandal would impact the investment accounts of a large number of investors.   Vanguard is the nation’s second largest money management firm with $700 billion under management, trailing only Fidelity Investments $900 billion book.   The firm has been extremely successful in recent months, as news of other high profile firm’s involvement in illicit market timing and late trading began to break and Vanguard managed to keep its own mutual fund and fund managers out of the fray.

The relationship between Wellington and Vanguard goes to the very genesis of the Valley Forge, Pennsylvania-based investment management firm.   Vanguard founder, John Bogle, began his fund management career at Wellington in 1951, which he served as chief executive for from 1967 until 1974 when he founded Vanguard.

Additionally, Wellington manages funds offered by ING, Hartford Financial Services and the Enterprise group of funds.   In total, Wellington managed $416 billion in stock and bond portfolios for approximately 1,000 clients as of March 2004.