March 23 (Bloomberg) -- Janus Capital Group Inc. may reach an agreement with U.S. regulators as soon as next month to settle allegations of allowing favored clients to make improper mutual- fund trades, people familiar with the discussions said.
The Denver-based money manager, with almost $150 billion of assets, probably will pay less than $600 million, said the people, who declined to be identified. That's the amount Alliance Capital Management Holding LP was penalized by New York Attorney General Eliot Spitzer and the Securities and Exchange Commission.
``Spitzer may want to make an example of them,'' said Robert Heim, an SEC lawyer from 1993 to 1999, who's now at the Meyers & Heim law firm in New York. ``He'll take a strong stance.''
Janus was among the first four companies accused by Spitzer of letting investors make short-term trades that hurt mutual fund holders. Spitzer and the SEC already have extracted more than $1.6 billion from companies including New York-based Alliance and MFS Investment Management of Boston in the nine-month probe of improper trading in the $7.5 trillion mutual fund industry.
Janus spokeswoman Shelley Peterson said ``bringing the matter to a satisfactory conclusion is a priority for us.'' The company set aside $62.8 million in the fourth quarter for costs from the probe. Janus recognizes that regulators' sanctions may exceed what the company has set aside, Peterson said.
Darren Dopp, a spokesman in Spitzer's office, declined to comment, as did SEC spokesman John Heine.
Bank of America
Bank of America Corp. of Charlotte, North Carolina, and FleetBoston Financial Corp. agreed last week to pay $675 million to resolve improper trading allegations, the largest penalty levied so far in the investigation.
Janus, led by Chief Executive Mark Whiston, acknowledged in December it had special trading arrangements with 10 investors starting in November 2001 and continuing to mid-2003. Some of the agreements involved the waiver of redemption fees, paid when investors exchange or sell fund shares within a defined period.
The market timers made $22.8 million in profits, according to a review conducted for Janus's independent trustees. Janus said in September that it ended the relationships and returned a total of $314 million to the market timers.
The scandal led to the departure of Richard Garland, who stepped down in November as head of Janus's international unit. Spitzer cited Garland's e-mails, which appeared to praise market timers, in his civil complaint against the Canary Capital Partners LLC hedge fund.
Shares of Janus have gained 38 percent during the past 12 months, lagging the 47 percent advance of the SIG Investment Managers Index. The stock was up 14 cents, or 0.9 percent, at $16.24 in New York at 9:53 a.m.
Market Timers
Market timers attempt to take advantage of the fact that mutual fund shares are priced once a day at 4 p.m. New York time, while the securities they hold trade almost continuously.
Colorado Attorney General Ken Salazar also is investigating Janus. Ken Lane, a spokesman for Salazar, declined to comment on a possible settlement. ``We continue to push our claims'' in discussions with the company, Lane said.
Spitzer said last week in an interview that he expects to wrest billions of dollars more from fund companies. His office, along with the SEC and other state regulators, are investigating more than 20 companies including Janus, Bank One Corp. and Strong Capital Management Inc., and insurers such as Conseco Inc.
The investigation of Janus follows a two-year stretch when the company lost clients amid concerns about investment performance. A net $15.2 billion was redeemed from Janus funds in 2003, after net outflows of $13.5 billion in 2002, according to Financial Research Corp. of Boston.
