A Janus Capital Group executive whose e-mail was cited during an investigation into allegations of improper trades and other employees who thought such trades were legitimate have resigned, the mutual fund company said.
The executive is Richard Garland, who joined the company in 1998 and headed Janus International, the division that seeks out overseas investors.
The company confirmed Garland’s departure on Monday.
Garland was the first high-profile employee at the Denver-based Janus group known to have resigned as New York Attorney General Eliot Spitzer and other regulators looked into their actions and results.
On Tuesday, Janus chief executive Mark Whiston said in a filing with the Securities and Exchange Commission that “a few employees thought that limited, controlled market timing was not harmful to the funds or their shareholders” have left Janus. He did not further identify the employees in what was called a “progress update in frequent trading issues and related actions.”
“The few employees central to the decisions to accept the discretionary trading arrangements had either left Janus prior to the announcement of the (New York) Attorney General’s allegation or have resigned and are now no longer with the company,” Whiston wrote.
Putnam Investments and Alliance Capital Management also have lost managers because of the scandal.
Spitzer claimed last month that Janus and other firms had allowed Canary Capital to engage in frequent trading, which is not illegal but could boost costs and hurt values for long-term investors. Janus had been telling investors it was an activity that it discourage.
“Both Janus and Mr. Garland came to the view that it would be best if he left the company,” Janus spokesman Blair Johnson said. “We have accepted his resignation.”
Spitzer had cited a Garland e-mail that said: “I have no interest in building a business around market timers, but at the same time I do not want to turn away ($10 million to $20 million).”
Janus has admitted it made several deals to allow frequent trading in its mutual funds.
But Whiston on Tuesday assured the SEC that no current portfolio managers set up or engaged in frequent trading arrangements, and the company has no such agreements now.
“However, because a large portion of our trading activity comes through third-party intermediaries and omnibus accounts, it is uncertain if such trading took place in any of the Janus funds and in violation of our agreements with these firms,” Whiston said in the filing.
Whiston said his company was cooperating with the New York investigation, and has retained Marianne Smythe, a former SEC director, to review company policies and assure that new business practices “are reasonably designed to ensure compliance with all applicable legal and business standards.”
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