Federated agrees to pay $100 million to settle improper trading allegations

[JURIST] Federated Investors [corporate website] has agreed to pay $100 million [SEC press release] to settle allegations of improper trading [JURIST report]. The investment firm was accused of allowing $1.6 billion in rapid trades by the hedge fund Canary Capital Partners in exchange for a fund investment which brought extra fees to Federated and also for allowing after-hours transactions. New York Attorney General Eliot Spitzer [official website] opened a probe into the mutual funds industry after receiving a tip about Canary, and the US Securities and Exchange Commission (SEC) [official website] later began its own investigation. As part of the settlement agreement [PDF text], Federated will pay $35 million in restitution to long-term investors who were harmed by the improper trading, of which $8 million has already been paid, $45 million in penalties, and will cut fees by $20 million during the next five years. The company is also required to review policies through an independent compliance consultant and to undergo compliance evaluations at least once every three years. Federated was not required to admit or deny wrongdoing in the settlement. Bloomberg has more.



 

About Paper Chase

Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

© Copyright JURIST Legal News and Research Services, Inc., 2013.