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Alliance Capital Cooperating With SEC Probe

Nov 6, 2003 | Crain's New York Business

Alliance Capital Management said on Thursday that it is cooperating with the Securities and Exchange Commission and the New York State Attorney General's office in the ongoing investigation into the firm's trading practices.

The company is also conducting its own internal investigation into market timing practices. Market timing is the rapid trading of mutual fund shares that allows investors to profit from short-term pricing imbalances. Alliance Capital said it believes some of its transactions did have an adverse effect on mutual fund shareholders.

The Manhattan-based money management firm received a Wells notice from the SEC last Friday, which recommended that enforcement action be taken against the firm. Under the Wells notice, the company is afforded an opportunity to respond and remains hopeful of reaching a resolution.

The firm could face sanctions, penalties, and restitution to mutual fund shareholders, depending on the outcome of the investigation and discussions with the SEC and the New York attorney general's office.

During the investigation, Alliance Capital said it uncovered "conflicts of interest with certain market timing transactions." This resulted in the suspension of two of its employees, a portfolio manager and a hedge fund executive, in late September. Alliance Capital manages $38 billion in assets, and is majority-owned by French insurer Axa.


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