Pension Officers Review Holdings at Fund Firm
Pension managers in California, Oregon and New Mexico are reviewing their investment of $1 billion with Massachusetts Financial Services Co. as the Boston-based company, accused of allowing improper trading in its mutual funds, faces possible sanctions from U.S. regulators.
The Los Angeles Water and Power Retirement Plan put MFS on its probationary “watch list,” investment officer Lesley Kuo said. MFS manages about $240 million for the Los Angeles fund. The Oregon Public Employees’ Retirement Fund and the New Mexico Public Employees’ Retirement Assn. also are monitoring MFS.
“They are under close scrutiny right now,” said Todd Jones, a spokesman for Oregon Treasurer Randall Edwards. MFS oversees $443 million for Oregon’s public retirement fund. “We’re watching the situation with interest.”
MFS, manager of the oldest U.S. mutual fund, has said the Securities and Exchange Commission was pursuing allegations that its fund prospectuses contained false and misleading information about policies on short-term trading. Regulators have accused more than 10 companies, including Alliance Capital Management Holding and Putnam Investments, of allowing or engaging in trading that diluted returns for long-term mutual fund investors.
Sun Life Financial Inc. of Toronto, MFS’ parent, has set aside almost $160 million to pay for a settlement with the SEC and state regulators. In addition to facing financial sanctions, MFS may reduce the fees it charges and regulators also may suspend the company’s chief executive, John Ballen, and investment chief Kevin Parke, according to people familiar with the proposed terms of the settlement.
The penalties would be the second-largest won by state and federal regulators in the probe of more than 20 companies in the $7.4-trillion mutual fund industry. Alliance Capital agreed Dec. 18 to cut its fees by about $350 million over five years and pay a $250-million sanction.
The SEC is seeking fines and restitution from MFS, and New York state Atty. Gen. Eliot Spitzer and the New Hampshire Bureau of Securities Regulation want fee reductions. Ballen did not return calls to his office and home; Parke was unavailable for comment. MFS spokesman John Reilly declined to comment.
MFS, which oversees about $140 billion, including $41 billion for institutional clients, has said regulators were investigating whether the company’s fund prospectuses contained “false and misleading information” about policies on short-term fund trades.
