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Fund Spy

Ameriprise Settles with SEC

Our opinion of this scandal-hit fund family just slid a few rungs.

We're concerned about the recent news regarding Ameriprise Financial (formerly American Express Financial Corporation). The mutual fund scandal added yet another episode on Dec. 2, 2005, when Ameriprise settled market-timing charges with regulators by agreeing to pay $15 million in "disgorgement and civil penalties" to the Securities and Exchange Commission.

The newly spun-off Ameriprise has been under investigation for market-timing at some of its funds between January 2002 and August 2003, while it was still a part of American Express. Yet until the settlement this month, none of the AXP funds disclosed anything to their shareholders about the investigation. (Ameriprise now markets its funds under the RiverSource name.) The only disclosure--and it was extremely vague (more on this to follow)--was made in regulatory filings of American Express. These filings are for American Express stockholders and are not distributed to owners of the firm's funds.

The Upshot
According to the SEC document detailing the settlement, American Express Financial Corporation, advisor to the AXP funds, failed to prevent market-timing even after changing its prospectus language to expressly forbid the practice because it is detrimental to long-term fundholders.