Over 30 people have now lost their jobs or been suspended in the US since regulators have been after the mutual funds industry for alleged trading abuses.
Bloomberg reports that Alliance Capital has 'ousted' two senior managers who look like they are carrying the can for the 'improper mutual-funds trading that regulators are investigating'. The firm is concerned that pension funds might decide to yank millions out from management as the scandal unfolds. Alliance Capital, which is the largest publicly traded US money manager, has confirmed that it will take a charge of $190m against third quarter earnings for litigation and restitution costs relating to an internal investigation over the affair.
Fifth-biggest US mutual fund, Putnam Investments, has said that it has agreed with US regulator the Securities and Exchange Commission (SEC) to make 'significant and far-reaching reforms' in an effort to reassure the industry, regulators and investors. Putnam has confirmed that it will make full restitution to disadvantaged investors, make changes to its board and tighten up its internal controls. According to the latest SEC quarterly filing, Putnam and owner Marsh & McLennan currently face 16 class-action lawsuits as a result of the affair.
Old Mutual has also been dragged into the scandal. The company has now confirmed that the founders of its US-based Pilgrim Baxter funds business have quit following an internal probe into its trading practices. There are rumours flying around that New York state Attorney General Eliot Spitzer is likely to make a move on the firm soon.
The Bank of New York, the eleven largest bank in the US, has confirmed that regulators have also asked it to provide information about its role as a custodian of mutual funds assets, even though the bank operates on the margins of the areas currently under the microscope.
Charles Schwab Corp. has said that it has found evidence of possible illegal customer trading in some of the 3,000 funds it sells. American Express has confirmed that regulators have sought out information about its mutal funds trading practices. And finally, Prudential Financial has said that Eliot Spitzer's office has asked for details about its variable annuities business.
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