Seligman Seeks to Block Spitzer Probe Expansion

J. & W. Seligman & Co., a New York-based money management firm, Tuesday asked a U.S. judge to block New York Atty. Gen. Eliot Spitzer from widening a probe of mutual fund trading abuses to focus on fees.

Spitzer and the Securities and Exchange Commission investigated whether Seligman permitted investors to engage in market timing in trades. The firm reached a tentative monetary settlement of the SEC and Spitzer’s probe last month, according to a lawsuit filed by Seligman. The firm says Spitzer is now demanding oversight of its fees, an expansion of his probe.

In the suit, Seligman asked U.S. District Judge Kimba Wood in New York to rule that the SEC, not Spitzer, has authority under the law to investigate and supervise fees charged by money managers.

“Seligman respects the attorney general but believes in this instance he has exceeded his authority,” the firm’s lawyer, Daniel Pollack, said.

A spokesman for Spitzer declined to comment.

With market timing, some investors can profit from the fact that mutual funds are valued once a day at 4 p.m. Eastern time, while the securities in the funds often trade throughout the day. Repeated buying and selling of the funds to take advantage of price discrepancies can increase transaction costs for all mutual fund owners.

Seligman paid about $3.7 million in May to mutual fund investors after finding four instances from 2001 to 2003 in which market timing took place.