SEC Announces New Late Trading Case Settlement

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

22 January 2007

The US Securities and Exchange Commission last Thursday announced that Fred Alger Management, Inc. and Fred Alger & Company, Incorporated will pay $40 million to settle the Commission's charges that the companies allowed market timing and late trading in the Alger Fund.

The Commission issued an Order which found that Alger Management and Alger Inc. failed to disclose these arrangements to the Board of Trustees of the Alger Fund.

The Commission's Order found that from at least 2000 through October 2003, Alger Inc. permitted select investors to market-time the Alger Fund, and in 2002, Alger Inc. began to demand that market timers make a 20% sticky asset investment in exchange for timing capacity. Alger Inc. also permitted at least one investor to late trade the Alger Fund.

Without admitting or denying the Commission's charges, the companies agreed to pay $30 million in disgorgement of ill-gotten gains and a $10 million penalty, all of which will be used to compensate investors.

Mark K. Schonfeld, Director of the SEC's Northeast Regional Office, announced that:

"Alger breached its fiduciary duties when it allowed harmful market timing in exchange for the additional management and other fees generated by the timers' money. In particular, Alger affirmatively attempted to lure timers to its funds by permitting them to time if they agreed to make a sticky asset investment."

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