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SEC Nears Settlement With Invesco, Ex-CEO

Aug 19, 2004 | AP

Federal regulators are close to settling a lawsuit that accuses Invesco Funds Group and its former CEO of improper trading in its mutual funds, attorneys for all three parties said Thursday.

Regulators and representatives of the two defendants have made significant progress and are optimistic the talks will be resolved within 30 days, said Robert Fusfeld, a Securities and Exchange Commission attorney.

During a federal court hearing, Fusfeld said they have been working to agree on a dollar figure for payments to investors in talks that have included the SEC, the defendants and other regulatory agencies.

"My sense is we are fairly close to a resolution," he said. "But we're not quite there yet."

Attorneys for Denver-based Invesco and former chief executive Raymond Cunningham agreed with Fusfeld's assessment.

Colorado Securities Commissioner Fred Joseph confirmed that his agency is involved in the talks while a spokesman for the New York attorney general's office declined comment. A telephone message seeking comment from Colorado Attorney General Ken Salazar was not returned.

The mutual funds company is one of more than a dozen that have been swept up in the nearly year-old trading scandal in the $7 trillion industry.

The SEC and regulators in Colorado and New York filed lawsuits alleging Invesco and Cunningham allowed certain clients to engage in market timing - frequent, short-term trading that skimmed profits from long-term shareholders.

Market timing is not illegal but most companies strictly limit it. Authorities contend companies that made selective exceptions committed fraud.

Regulators said in the lawsuits they were seeking the return of nearly $161 million in fees they claimed Invesco collected from investors in the funds involved, as well as unspecified civil penalties.

The prospectuses for Invesco funds restricted fund trades to four a year, but authorities allege big clients were exempted as part of a "Special Situations" program that became an increasing part of Invesco's strategy in 2001 as the market was falling.

Invesco's parent, Amvescap, has said it is working to settle the case.

The U.S. District Court hearing came as the SEC sought additional time to file an amended complaint. Fusfeld said the complaint would add one violation, likely against Invesco, that is based on the evidence gathered to date. The specifics were not discussed.

U.S. District Judge Edward Nottingham gave the SEC an additional 20 days to file an amended complaint if the settlement is not finalized first.

In the past 12 months, several major fund complexes including Alliance Capital Management, Janus Capital Group and Bank of America Corp. have paid hundreds of millions of dollars to settle improper trading charges. Fund executives, managers and traders have also been accused of wrongdoing.

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