Week in Review
September 10, 2007
District Court Orders Market Timer to Pay $500k
The U.S. District Court for the Northern District of Illinois has ordered John M. Fife, a principal of Clarion Management, a hedge fund based in Chicago, to pay more than $500,000 in fees and disgorgement for having allegedly placed illegal market-timing trades in 2002 and 2003. The court also barred him from working at an investment advisory firm for 18 months.
The judgment follows the Securities and Exchange Commission's initial suit against Fife and Clarion in January.
The SEC said he created Clarion with the sole purpose of market timing international mutual fund sub-accounts in variable annuities. The SEC said he purchased variable annuity contracts issued by Lincoln National Life Insurance and used deceptive tactics to hide Clarion's ownership of the annuities by creating phony family trusts and limited liability companies as beneficiaries. When Lincoln imposed trading restrictions in 2002 when it discovered that it was actually Clarion that was the beneficiary of the contracts, Fife then surrendered the contracts and purchased additional ones under new trust and limited liability company names.
Fidelity to Open R&D Unit In Galway, Employing 49
Fidelity Investments will open a research and development facility in Galway, Ireland manned by 49 professionals who will collaborate with a dozen professors at local universities, the Boston Globe reports. They will join the 300 people who already work in Galway and Dublin in fund administration.
"The quality of the Irish work force, the success of our existing Irish operations and the world-class research carried out in the Irish universities were key factors in our decision to expand in Ireland," said Paul Murtagh, managing director of the Fidelity technology group in Ireland.
Ireland has been pushing to attract research and development business in recent years because of its high pay. In fact, Ireland's Investment and Development Agency said it offered financial incentives to Fidelity, although it declined to specify what they were.
ICI Spent $2.3 Million On Lobbying Through June
The Investment Company Institute spent $2.3 million lobbying Congress, the Treasury, the Labor Department and the Securities and Exchange Commission in the first half of the year, the Associated Press reports, citing a disclosure form with the Senate.
Issues of concern to the ICI included shareholder votes on executive pay, regulation of the securities markets, international investments, 401(k) fees and taxes.
Darfur Activists Extend Plea to Four More Firms
The Save Darfur Coalition is extending its campaign against mutual fund firms that have investments in companies in Sudan to include four more fund firms: American Funds, Franklin Resources, JPMorgan Chase and Vanguard, the Boston Globe reports.
In addition, the group plans to continue to pressure Fidelity via television and print ads and a petition with 150,000 signatures to sell its remaining shares in PetroChina, a Beijing oil company that does business there. As of Aug. 1, Fidelity still owned $608 million in PetroChina stock. Franklin owned $1.7 billion and JPMorgan Chase $1.6 billion.
"We're still targeting them because they haven't fully divested," said Zahara Heckscher, campaign manager for the Save Darfur Coalition. "We're asking them to do the same thing we're asking the others."
Franklin defended its investments in the region, saying in a statement, "In our experience investing in emerging markets, we have seen that fostering economic and business development through investment in troubled regions can often help in achieving reform."
American Funds' parent Capital Group Cos. issued a similar statement, saying that it understands the group's concerns, but "others believe that the rest of the world must stay engaged to have any influence" over the actions of the Sudanese government in the Darfur region, where mass genocide is said to be taking place.
A JPMorgan spokeswoman said she could not immediately comment since the funds holding PetroChina are based in London and Hong Kong, and a Vanguard spokeswoman said two of the three funds with holdings in PetroChina are index funds tied to a benchmark. A Fidelity spokeswoman said many of the company's funds with PetroChina holdings are run by a sister company, Fidelity International, based in London. The Globe attempted to reach a spokesman there with no success. The Fidelity spokeswoman in the U.S. also noted that only two of the funds holding PetroChina are based in the States with total holdings of only $65 million.
Hedge Fund Honchos Make More in 10 Minutes Than Average Worker in a Year
The top 20 hedge fund executives' earnings averaged $655.5 million in 2006, according to a report by the Institute for Policy Studies and United for a Fair Economy.
By comparison, the average U.S. worker earned $29,500 last year, which means that at an average hourly salary of $210,700 for the top hedge fund honchos, they earned more in 10 minutes than most Americans do in a year.