Federated Investors Reaches Settlement With Spitzer

by Glen Shapiro, LawAndTax-News.com, New York

01 December 2005

Federated Investors, Inc on Monday announced that it has entered into settlement agreements with the Securities and Exchange Commission (SEC) and the New York State Attorney General (NYAG), Eliot Spitzer to resolve the company’s previously disclosed past mutual fund trading issues.

Under the terms of the settlements, Federated has agreed to pay fund shareholders a total of $72 million, of which $45 million is a civil penalty. An escrow fund has been established for distribution to eligible fund shareholders according to a plan that will be created by an independent distribution consultant and approved by the SEC and the Independent Trustees of the Federated mutual funds.

In addition, Federated has agreed to reduce the investment advisory fees on certain Federated funds by $4 million per year over the next five years, based upon effective fee rates and assets under management as of September 30, 2005. Specific fund fee reductions will be determined by Federated in consultation with the Independent Trustees of the Federated Funds and will be reviewed with the NYAG.

“These settlements reflect our focus on strengthening the trust and confidence of investors and our dedication to safeguarding the investments of our clients,” J. Christopher Donahue, President and CEO of Federated Investors explained on Monday, adding that:

“Today’s announcement comes after an extensive internal review, which was substantially completed over a year ago, and our implementation of several initiatives over the last 20 months to enhance our policies and procedures while reinforcing our long history of fiduciary responsibility.”

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $207.4 billion in assets as of September 30, 2005.

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