ALBANY, N.Y. -- RS Investment Management agreed to pay $30 million to settled allegations it allowed "excessive" market timing in its mutual funds, New York Attorney General Eliot Spitzer said yesterday.
Under the settlement reached jointly with the Securities and Exchange Commission, San Francisco-based RS Investments will pay $11.5 million in restitution and disgorgement to investors shut out of what Spitzer called improper trading that hurt most investors for the gain of a few. The firm will also pay $13.5 million in civil penalties and $5 million in fee reductions to investors over five years to end the antifraud investigations, according to the settlement.
"RS managers and executives knew that arrangements with market timers were contrary to claims made in the company's prospectus and harmful to long-term investors," Spitzer said. "Despite this knowledge, company officials allowed and facilitated market timing. . . because it proved to be a lucrative source of fee revenues."
"Today's action shows that the market-timing abuses uncovered by regulators in recent months extend to relatively small boutique firms like RS," said Helane Morrison, SEC district administrator in San Francisco.
The firm, which was part of a former unit of Boston-based FleetBoston Financial Corp. called Robertson Stephens, admitted none of the regulators' findings and emphasized there were no allegations employees engaged in market timing of RS funds or knew about it.