Securities bureau probes giant investment firm
The company handling $142 million of New Hampshire workers’ retirement funds is under investigation by the U.S. Securities and Exchange Commission and the New Hampshire Bureau of Securities Regulation for alleged improper trading activities, including market timing.
“We are doing our due diligence,” said Don Hill, commissioner of the Department of Administrator Services and chair of the state’s Deferred Compensation Commission. “We are taking this very seriously.”
ING Life Insurance and Annuity Company, a Dutch-owned firm with headquarters in Hartford, Conn., manages the state’s 457(b) account, similar to a private employee’s 401(k) and completely unrelated to the New Hampshire Retirement System. About a quarter of the state’s 12,000 employees contribute to the fund, which the state does not pay into.
ING offers state workers a variety of fund options – such as those offered by Vanguard and Fidelity — but nearly 65 percent of the money is held in various ING mutual funds — with nearly half in the ING Stable Access fund.
On March 29, in ING’s annual filing with the SEC, it disclosed that it has received “informal and formal requests for information” since September from “various governmental” agencies in connection with the ongoing mutual fund scandal. That prompted the company to conduct its own internal review, which revealed “several arrangements allowing third parties to engage in frequent trading of mutual funds within our variable insurance and mutual fund products.”
The review also identified two investment professionals who engaged in “improper frequent trading in ING funds.”
The company went on to say that much of these improper activities date back to before they were acquired by ING, and have since been discontinued. ING also promised to reimburse shareholders, and it was ING that informed the state’s deferred compensation board about the matter, though by that time an article about ING’s annual statement disclosure had already appeared in the Wall Street Journal.
The Bureau of Securities of Regulation – whose director, Mark Connolly, sits on the Deferred Compensation Board – has launched its own investigation, said deputy director Jeffrey Spill.
“We are aware of the company’s 10k disclosure of inappropriate activities,” Spill said. “We are investigating the matter. We can’t comment further than that.”
The bureau recently completed a similar investigation of MFS, a Massachusetts mutual fund, in conjunction with the SEC that resulted in a $225 million settlement with the federal agency, plus a $1 million settlement with the state securities office. The latter is to be earmarked for state investor education programs.
The SEC also is conducting its own ING investigation, said ING spokesman Philip Margolis, but “they are investigating everybody.”
Margolis could not say whether any investigation touched on funds in the New Hampshire deferred compensation plan. He referred all further calls to Cindy Schaus, who is handling all inquiries about the matter. Schaus did not return phone calls by deadline.
ING Life Insurance and Annuity Company is a subsidiary of ING Groep NV, based in the Netherlands, a financial giant with more than $80 billion in revenues. Another ING subsidiary acquired Aetna Inc. for $7.7 billion at the end of 2000. That just about the time it won the contract to handle New Hampshire’s deferred compensation plan.