Word: spitzers
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Dates: during 2000-2009
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...Saturday morning four weeks ago, New York State attorney general Eliot Spitzer walked onto a tennis court in Washington for a match with his niece and chanced upon Matthew Fink, president of the Investment Company Institute, the mutual fund industry's trade group. Howya doing? Spitzer asked. Fine, Fink answered. He then mentioned that his industry seemed to be under unusual scrutiny, adding, "At least you aren't giving us a hard time." Spitzer's response left Fink weak in the knees. "Just wait," he said with a smile...
Fink didn't have to wait long. On Sept. 3, the crusading A.G., fresh from lashing the brokerage industry into a $1.4 billion settlement over fraudulent stock research, revealed his latest target: the mutual fund business. This time Spitzer asserts that the industry we have trusted to put us on equal footing with the big hitters was favoring them at our expense--through short-term trading schemes that dilute the gains of long-term holders...
...investigation issued its first criminal charge last week and began to shift to a second set of mutual fund trades--those by Millennium Partners, a $4 billion hedge fund run by storied Wall Street investor Israel Englander. And Spitzer wasn't the only cop on the Wall Street beat. The NASD, a securities-industry regulator, had settled a separate case with Morgan Stanley, which it charged with offering brokers improper incentives to push in-house funds that might not be best for its clients...
...fallout from Spitzer's assault has been swift. Fund-research firm Morningstar--the 800-lb. gorilla of independent fund analysis--took the unprecedented step of warning investors to avoid the four fund families at the eye of Spitzer's storm--Strong, Bank of America's Nations Funds, Bank One's One Group, and most Janus offerings (except for its Mid Cap Value, Small Cap Value and Risk-Managed Stock funds, which are run by outside managers). "The firms put their own profitability ahead of shareholders'," says Kunal Kapoor, Morningstar's associate director of fund research. "Until we see changes...
...allegations center on one hedge fund, Canary Capital Partners, and its relationships with mutual-fund companies, including Bank of America's Nation's Funds, Banc One, Janus and Strong. Spitzer says the trail could lead to hundreds of mutual-fund companies. The Securities and Exchange Commission is investigating. The Investment Company Institute pledges full support of the probe...