Skip to Content
Fund Times

Fund Times: Waddell & Reed to Pay $77 Million in Settlement

Plus, Washington Mutual and Comerica put fund shops on the block.

Mentioned: , , , ,

Waddell & Reed was hit with a $77 million tab to settle market-timing charges from regulators at the SEC, the New York attorney general's office, and the Kanas securities commissioner. The firm will pay $52 million in fines plus an additional $25 million in fee reductions to be spread out over five years.

According to the settlement, Waddell & Reed permitted market-timing in its funds going back as far as 1996 right up until September 2003 when Eliot Spitzer announced his probe into the practice. The settlement documents say that Waddell & Reed was more direct than most of the firms in the scandal in that it simply charged additional fees for market-timing space rather than quid pro quo sticky money deals: "The Timing Agreements required the Fee Paying Timers to pay W&R or W&R Services a fee ranging from 25 to 100 basis points on the timing assets, purportedly as payment for services."

Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.