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Federated to pay $100M to settle charges

ALBANY, N.Y. - Federated Investors Inc., one of the nation's largest investment managers, agreed to pay $100-million to settle state and federal charges that it allowed favored clients to benefit from mutual fund trades at the expense of others, New York Attorney General Eliot Spitzer and U.S. regulators said Monday.

"With this agreement, virtually the entire mutual fund industry has now sworn off improper trading practices and agreed to compensate investors who were harmed," Spitzer said of the settlements with his office and the Securities and Exchange Commission. "Federated worked with regulators to address problems with improper trading."

Federated's president and CEO, J. Christopher Donahue, said in a statement that the settlements "reflect our focus on strengthening the trust and confidence of investors and our dedication to safeguarding the investments of our clients."

Founded in 1955, Pittsburgh-based Federated is one of the nation's largest investment managers with assets under management of more than $207-billion, according to the firm's Web site.

Federated is the 14th firm to settle improper mutual fund trading charges since Spitzer's case against the Canary Capital Partners firm in 2003.

Federated agreed to make reforms, to be censured and to pay $35-million to investors, $45-million in civil penalties and cut its management fees by $20-million over five years. Federated will hire a senior officer to monitor the setting of advisory fees for managing funds to be sure they are "at arm's length and are reasonable," Spitzer and the SEC said.

[Last modified November 29, 2005, 02:15:28]