The U.S. Securities and Exchange Commission on Monday accused three former Janus Capital Group executives of allowing market-timing transactions, or prohibited rapid trades in and out of mutual funds.
The SEC alleges that Warren Lammert, former manager of the Janus Mercury Fund; Lars Soderberg, a former executive vice president responsible for sales and product development; and Lance Newcomb, a former regional sales director, violated federal securities rules by allowing brokerage customers to make frequent trades in Janus mutual funds.
The SEC has requested that the three, who are no longer employed at Denver-based Janus, appear before an administrative law judge and is seeking undisclosed fines.
The Janus Mercury Fund, like other Janus funds, limited investors to four exchanges per year, warning them frequent trades could disrupt investment strategy and raise expenses for all investors.
Back in November 2001, the SEC alleges, Lammert entered into an arrangement with brokerage firm Trautman Wasserman to allow more-frequent trades in the Mercury Fund.
Newcomb was the sales representative servicing the account. The SEC alleges Soderberg and Newcomb expanded the frequent-trading agreement to other Janus funds, without informing the managers or investors of those funds.
Trautman customers made more than 265 short-term trades worth $2.6 billion in Janus mutual funds in under a two-year period, the SEC said.
In another agreement crafted by Lammert, the SEC alleges, one customer of the brokerage firm Brean Murray & Co. made 53 purchases and 54 sales worth $453 million in a nine-month window.
Efforts to reach Lammert and Soderberg were unsuccessful. Newcomb, in comments to Bloomberg Business News, denied any wrongdoing.
“I categorically deny any and all of their charges,” Newcomb said. “I did not organize, negotiate or approve any type of market-timing arrangement at Janus.”
The SEC complaint is the latest development in a larger investigation stretching back to September 2003, when New York Attorney General Eliot Spitzer accused Janus and other fund groups of allowing market timing agreements.
“This is between the individuals and the SEC,” said Janus spokeswoman Shelley Peterson. “Janus settled with regulators over two years ago.”
Janus agreed to pay $226 million in penalties in April 2004. The Janus chief executive at the time, Mark Whiston, stepped down.
Janus has set aside $100 million in a “restoration” fund for affected investors, but hasn’t paid the money yet, Peterson said.
Lammert ran the Janus Mercury Fund from 1993 until he left in March 2003. He now works at Granite Peaks Capital, a Boston-based hedge fund.
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
