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Week in Review

SEC to Create Office Focused on Restitution

The Securities and Exchange Commission will create an office focused solely on returning restitution money to investors harmed by stock fraud, and one of its first missions will be to return the $3.4 million in fines and disgorgement to mutual fund investors impacted by the timing scandal.

The office makes sense, given how slowly the Commission currently is able to return the money, SEC Chairman Christopher Cox told a Senate appropriates subcommittee. The SEC has been working with the Treasury Department's Bureau of Public Debt to invest money it collects in interest-bearing accounts.

Janus, Invesco Close To Repaying Investors

Janus and Invesco are close to repaying the combined $425 million in restitution they owe investors. The Securities and Exchange Commission will soon announce how the money will be distributed this coming fall, Donald Hoerl, associate director of enforcement in the SEC's Denver office, told the Rocky Mountain News.

"The Commission wants [the payments] out the door," concurred George Curtis, head of the Denver office, of the money first collected four years ago.

While Janus' share of the payments is $100 million and Invesco's is $325 million, analysts said that individual investors could only expect to see a few dollars returned to them.

Supreme Court to Hear Municipal Bond Case

The Supreme Court said it will hear a case in its next term this fall that could drastically impact both the municipal bond market and 529 college savings plans.

At issue is whether states can exempt municipal bonds issued in their own state from taxes yet levy taxes on municipal bonds issued by other states.

A Kentucky court ruled last year that taxing municipal bonds issued by other states is in violation of the anti-discriminatory provisions for out-of-state commerce outlined in the Constitution.

"The outcome has broad implications for the municipal bond market at large, far beyond Kentucky's borders," the state's Secretary of Commerce John R. Farris told

Yet, based on a case concerning local governments in New York that the Supreme Court heard in which it ruled in their favor, some legal experts expect it will overturn Kentucky's decision and allow states to continue to exempt their own municipal bonds from taxes.

Mansueto Aims to Make Morningstar a Super Site'

Joe Mansueto, chairman of Morningstar, said he has even bigger plans for his company: to deliver a "seamless, integrated solution" like Microsoft Office, the Chicago Sun Times reports.

Mansueto made the comment during an annual shareholder meeting at which he revealed that Morningstar plans to unveil additional research products-namely covering hedge funds, foreign currencies, commodities, retirement planning and portfolio analytics-and turn its website into a launch pad, or "super site," for all of its products and services.

Mansueto plans to continue to serve individuals, financial planners and institutions, thereby covering the entire financial services industry and achieving "critical mass," he said.

Morningstar's revenue rose 39% in 2006, and the company typically posts profits of 25% or better.

Pozen Sees No Reason To Sell MFS Investments

MFS Investment Management, which had been on the market until last October, is no longer looking for a buyer, the firm's chairman, Robert Pozen, tells Bloomberg.

"We think there would not be a benefit to selling the company because we operate as a relatively standalone operation [from parent company Sun Life Financial] and do very well," Pozen said.

Of particular note, Pozen said, since a new management team was put in place three years ago, MFS's assets have increased 50% to $200 billion. The firm's profits also increased 38% in the first quarter to $61 billion.

"We're feeling pretty good about it," Pozen said.

Shareholders Concerned About Proxy Advice Firms

Mutual funds, pensions and other large shareholders that rely on two large proxy advisory firms, Glass Lewis and Institutional Shareholder Services, are concerned that new ownership at the businesses might be affecting the quality of the advice they impart, The Wall Street Journal reports.

In particular, Xinhau Finance of Shanghai, which has ties to the Chinese government, increased its stake in Glass Lewis from 19.9% to buy it outright, and two weeks ago, two of the firm's top research executives resigned due to concerns about Xinhua Finance.

"I am uncomfortable with and deeply disturbed by the conduct, background and activities of Glass Lewis's new parent, its senior management and its directors," said Jonathan Weil, the former director of research at Glass Lewis.

However, Dan Connell, chief operating officer at Xinhua Finance, said the Chinese government only owns 1% of Glass Lewis and that its proxy advisory business is kept distinct from its investor relations service.

The concerns at ISS, which RiskMetrics acquired late last year, are that should RiskMetrics go public, as it is considering, it could beef up its corporate governance consulting business, which would mean it could be more inclined to side with management.