Pilgrim Baxter to Pay $90 Million, Cut Fees

Mutual fund group Pilgrim Baxter & Associates agreed Monday to pay $90 million and cut its fees by $10 million in a settlement with regulators over allegations of fund share trading abuses.

The affiliate of London-based Old Mutual agreed to pay $50 million in civil penalties and repay $40 million in ill-gotten gains, the Securities and Exchange Commission said.

Pilgrim Baxter, which manages about $5 billion in fund assets, also agreed to cut its management fees by $10 million, or 3.2%, over five years, in a coordinated agreement with New York Atty. Gen. Eliot Spitzer.

The settlement is the eighth since last year involving a major mutual fund group and accusations of “market timing,” or rapid share trading aimed at exploiting short-term market moves.

The SEC said that from at least June 1998 through 2001, Pilgrim Baxter allowed more than two dozen favored investors to trade quickly in and out of certain funds, at the expense of longer-term investors.

Market timing by some investors in Pilgrim Baxter funds “was exacerbated by the self-dealing of its principals and founders, Gary Pilgrim and Harold Baxter,” the SEC said, adding that a separate case against the two men will continue.

Baxter declined to comment; Pilgrim could not be reached.

Old Mutual Chief Executive Jim Sutcliffe said the firm would seek compensation from the two former executives.