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Chuck Jaffe: Supreme Court leaves fund investors hanging
Wasn't aware of Janus's duplicity until reading linked article. Assuming Jaffe's summary is correct, why was Dick Strong drummed out of business and these guys allowed to continue? Seems to me the difference is one pilfered from or otherwise abused his own house while the other consented to have outsiders come in and do it in exchange for a piece of the pie.
You have to have 100% trust in the integrity of those with whom you deal. I'd extend that to other areas like mortgage banks/brokers and insurers as well. Thanks for a good read. Articles thrust was with the S.C. ruling, but found this other stuff interesting too.
One difference is insider trading. Strong (the company) not only allowed Canary Capital to rapid trade its funds (as did Janus), but provided insider information to Canary (and of course to Dick Strong, who rapid traded on the fund he was personally managing).
Dick Strong (the person, not the company) was barred from the industry for personally, as an adviser, defrauding his client (the funds, I believe). Note that the SEC found that Dick Strong "only" violated Investment Adviser Act's sections 206(1) and 206(2), that talk about this fraud.
For Strong (person and company) this was not the first violation. "This [was] the second time that Strong and SCM [were] the subject of an SEC enforcement action for placing their interests before the interests of mutual fund investors. That fact, together with the gravity of the breach of trust ... shows that the severe sanctions imposed ... [were] warranted."
Similarly (and also for insider trading as well as other violations including similar deals with a hedge fund in which Pilgrim had a personal economic interest, Gary Pilgrim and Harold Baxter (of PBHG notoriety) were also barred from the industry.
At Janus, the principals involved in making the deals quit the company; one can argue that the SEC should have gone after those individuals with pitchforks too.
I'll add a little more ... Memory is a funny thing. I was in the Strong funds and liked em for a while so maybe a little blinded to their transgressions. Recalled that Strong himself was making frequent trades in his own account, a breach of his firms frequent trading rules as well as his fiduciary duty. Wasn't aware he had previously run afoul of the SEC.
I did not realize/recall that Strong was also allowing outsiders to rapid trade. But, I should have known. Obviously if these rapid traders are allowed to skim off the top using computer programs designed for that purpose theres less left over for the working stiff who is patiently plowing retirement money into the funds.
Actually I'd find this (second) organized and systematic approach to skimming even more reprehensible than the CEO monkeying around with his personal holdings.
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Benjamin Franklin
You have to have 100% trust in the integrity of those with whom you deal. I'd extend that to other areas like mortgage banks/brokers and insurers as well. Thanks for a good read. Articles thrust was with the S.C. ruling, but found this other stuff interesting too.
Dick Strong (the person, not the company) was barred from the industry for personally, as an adviser, defrauding his client (the funds, I believe). Note that the SEC found that Dick Strong "only" violated Investment Adviser Act's sections 206(1) and 206(2), that talk about this fraud.
For Strong (person and company) this was not the first violation. "This [was] the second time that Strong and SCM [were] the subject of an SEC enforcement action for placing their interests before the interests of mutual fund investors. That fact, together with the gravity of the breach of trust ... shows that the severe sanctions imposed ... [were] warranted."
SEC: Richard Strong and Two Executives Permanently Barred from Mutual Fund Industry
Similarly (and also for insider trading as well as other violations including similar deals with a hedge fund in which Pilgrim had a personal economic interest, Gary Pilgrim and Harold Baxter (of PBHG notoriety) were also barred from the industry.
SEC: SEC v. Pilgrim, Baxter, and Pilgrim Baxter & Associates (complaint)
SEC: Baxter and Pilgrim to Pay $80M Each and to be Permanently Barred from Associating with a Mutual Fund or Investment Adviser. The SEC found that Baxter and Pilgrim each violated Rule 10b-5, that encompasses insider trading, as well as for violating Adviser's Act 206(1) and (2), same as Strong, and lots of other code sections.
At Janus, the principals involved in making the deals quit the company; one can argue that the SEC should have gone after those individuals with pitchforks too.
I'll add a little more ... Memory is a funny thing. I was in the Strong funds and liked em for a while so maybe a little blinded to their transgressions. Recalled that Strong himself was making frequent trades in his own account, a breach of his firms frequent trading rules as well as his fiduciary duty. Wasn't aware he had previously run afoul of the SEC.
I did not realize/recall that Strong was also allowing outsiders to rapid trade. But, I should have known. Obviously if these rapid traders are allowed to skim off the top using computer programs designed for that purpose theres less left over for the working stiff who is patiently plowing retirement money into the funds.
Actually I'd find this (second) organized and systematic approach to skimming even more reprehensible than the CEO monkeying around with his personal holdings.