ALLIANCE IN $250M DEAL, SOURCES SAYDec 15, 2003 | New York Post The Securities and Exchange Commission and New York Attorney General Eliot Spitzer are expected to reach a settlement with mutual fund giant Alliance Capital this week, with Spitzer's proposal calling for significant fee reductions, say people familiar with the situation.
Regulators are expected to levy civil charges against Alliance and some of its executives for letting favored investors market-time its funds, which lowers returns and harms long-term investors. The settlement would require Alliance to pay $250 million in penalties and restitution, make corporate governance changes and improve disclosure, say people familiar with it.
Former top execs John Carifa and Michael J. Laughlin are expected to face civil charges for brokering market-timing deals for some clients. Spitzer has said expects fee reduction to be a critical part of any settlement. His spokesman Darren Dopp said, "We continue to work with the SEC and hope to have a positive settlement soon."
The SEC defended its decision not to include fees in any Alliance settlement. "As we have said before, we intend to take up those issues in rule making in the next two months. Those would apply to all funds and not just Alliance," said SEC spokesman Herb Perone, who declined to comment on the settlement.
The SEC believes fee reductions don't serve its law enforcement objectives, "especially in cases where the alleged violations had nothing to do with the level of the fees," he said.
Some at the SEC fear fee reduction would lead to cost cutting, which could ultimately hurt investors.