Colorado Attorney General Ken Salazar said Thursday his office and Janus Capital Group are in settlement talks regarding market-timing activities by the Denver money manager.
Salazar was ready to file a lawsuit against Janus for violations of the state’s Consumer Protection Act, resulting from frequent fund trading that hurt small investors.
But he pulled back after meeting with Janus executives, including chief executive Mark Whiston, Thursday morning.
“I believe that there is a sound basis for us to move forward with formal action against Janus,” Salazar said in a prepared statement. “However, I am also persuaded that Janus is attempting to move forward in good faith to resolve issues concerning market timing in its mutual funds.”
Salazar did not detail specifics he would seek in any settlement, but said monetary penalties would be in the mix.
New York Attorney General Eliot Spitzer and the Securities and Exchange Commission also are investigating Janus but haven’t filed charges. Salazar said his office would work with the SEC and Spitzer as it continues negotiating with Janus.
A lawsuit from Salazar could have pushed the other regulators to take action, but Janus convinced Salazar it would address his concerns.
“We have had discussions with the Colorado attorney general and are cooperating fully with his office,” Janus spokeswoman Jane Ingalls said.
Denver-based Invesco Funds Group plans to fight lawsuits filed against it this month by the SEC, Salazar and Spitzer. But Janus has taken a different approach, promising reforms and restitution to harmed investors.
The company in October said it set aside $9 million to cover legal fees and potential costs associated with its market- timing activities.
Janus admits to having a dozen market- timing agreements with large investors, of which four still were active when Spitzer announced a broad investigation of the fund industry in September.
All 12 have been terminated.
Although market timing is legal, studies show that such short-term trading of mutual-fund shares adds costs and dilutes the return available to long-term investors.
A lawsuit would allege Janus made false representations about discouraging market timing while not disclosing secret side agreements with large investors.
Penalties under the state Consumer Protection Act are $2,000 per violation or $10,000 per violation if victims are senior citizens.
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