Press Release: American Express Financial Corporation, Now Known as Ameriprise Financial, Inc., to Pay $15 Million to Settle Market Timing Charges; 2005-169; Dec. 1, 2005
Ameriprise Financial (formerly American Express Financial Corporation) paid $15 million to settle SEC charges for allowing known market timers to exploit its mutual funds and variable annuities despite prospectus prohibitions, failing to monitor employee trading, and concealing exceptions from investors.
Ameriprise Financial agreed to pay $15 million in disgorgement and civil penalties to settle SEC charges related to market timing violations in its American Express Funds and variable annuity products. Despite explicitly prohibiting market timing in January 2002, Ameriprise permitted known timers to continue trading for six to eight months and failed to implement monitoring procedures for employee 401(k) trades until October 2003, while also allowing a known timer to exploit variable annuities without disclosing the exception. The settlement includes a censure, a cease-and-desist order for violations of Sections 206(1), 206(2) of the Investment Advisers Act and Section 34(b) of the Investment Company Act, and mandates annual board reports on compliance procedures.
Ameriprise Financial, Inc. (formerly American Express Financial Corporation) agreed to pay $15 million to settle SEC charges for permitting market timing in its American Express Funds and variable annuity products despite explicit prohibitions in prospectus disclosures. In January 2002, Ameriprise updated its prospectuses to ban market timing, yet continued allowing known market timers to trade for an additional six to eight months without enforcement. The company also failed to establish any monitoring or disclosure protocols for employee trading through 401(k) accounts until October 2003, and permitted a known market timer to continue exploiting variable annuity products until that same date without informing other investors. The SEC found these actions violated fiduciary duties under Sections 206(1) and 206(2) of the Investment Advisers Act and Section 34(b) of the Investment Company Act. As part of the settlement, Ameriprise was censured, ordered to cease and desist from such violations, and agreed to implement enhanced compliance measures, including annual presentations to its Board and the funds’ Boards on the adequacy of market timing controls. The $15 million payment, comprising disgorgement and civil penalties, was directed to a Fair Fund for distribution to harmed shareholders. Ameriprise consented to the SEC’s order without admitting or denying the findings, and the action was filed concurrently with a related enforcement action by the Minnesota Division of Securities.
Exhibits & Attached Documents (2)
Extracted insights
- $15.00M $15 MILLION $10M–$100M
- $15.00M $15 million $10M–$100M
- company american express financial corporation
- person market timing charges
- person merri jo gillette
- American Express Financial Corporation Pay $15 Million
- American Express Financial Corporation Settle Market Timing Charges
- American Express Financial Corporation Allow Certain Shareholders To Market Time The Mutual Funds It Advised
- American Express Financial Corporation Change The Prospectus Disclosures For The AXP Funds To Specifically Prohibit Market Timing
- American Express Financial Corporation Permit Certain Market Timers To Continue Market Timing The AXP Funds For An Additional Time Period That Lasted Approximately Six To Eight Months
- American Express Financial Corporation Fail To Put In Place Any Procedures To Monitor Or Prevent Employees From Market Timing The AXP Funds Through Their 401(k) Accounts
- American Express Financial Corporation Allow A Known Market Timer To Continue To Market Time These Variable Annuity Products Until October 2003 Without Disclosing This Exception To Other Investors
- Merri Jo Gillette Say By Failing To Inform Investors That It Deviated From The AXP Funds' Prospectus Disclosures In Allowing Certain Known Market Timers To Continue Trading In And Out Of The Funds It Advised, AEFC Ignored Its Responsibility To Treat All Fund Shareholders Fairly And Honestly
- American Express Financial Corporation Agree To Be Censured And To Cease And Desist From Committing Or Causing Violations Of Sections 206(1) And 206(2) Of The Investment Advisers Act Of 1940 And Section 34(B) Of The Investment Company Act Of 1940
- American Express Financial Corporation Consent To The Issuance Of The Commission's Order Without Admitting Or Denying The Findings Contained Therein
AMERICAN EXPRESS FINANCIAL CORPORATION, NOW KNOWN AS AMERIPRISE FINANCIAL, INC., TO PAY $15 MILLION TO SETTLE MARKET TIMING CHARGES FOR IMMEDIATE RELEASE 2005-169 Washington, D.C., Dec. 1, 2005 - The Securities and Exchange Commission announced settled enforcement proceedings against American Express Financial Corporation, now known as Ameriprise Financial, Inc. (AEFC), a registered investment adviser headquartered in Minneapolis, Minn., related to allegations that AEFC acted contrary to prospectus disclosures when it allowed certain shareholders to market time the mutual funds it advised, the American Express Funds (AXP Funds) when the AXP Funds' prospectus disclosures expressly prohibited market timing. As part of its settlement with the Commission, AEFC will pay $15 million in disgorgement and civil penalties, all of which will be placed in a Fair Fund for distribution to certain shareholders of the AXP Funds. AEFC also agreed to certain undertakings, including making annual presentations to its Board of Directors and the AXP Funds' Boards of Directors about the adequacy of its policies and procedures on market timing. The Commission's Order finds that in January 2002 AEFC changed the prospectus disclosures for the AXP Funds to specifically prohibit market timing. Despite this express prohibition against market timing, AEFC still permitted certain market timers to continue market timing the AXP Funds for an additional time period that lasted approximately six to eight months. In addition, after changing the AXP Funds' prospectus disclosures, AEFC did not put in place any procedures to monitor or prevent employees of AEFC and related companies from market timing the AXP Funds through their 401(k) accounts or disclose to investors that there were no such procedures until October 2003. Finally, even after anti-market timing language was added to the prospectuses of the variable annuity products sold by AEFC in May 2002, AEFC allowed a known market timer to continue to market time these variable annuity products until October 2003 without disclosing this exception to other investors. Merri Jo Gillette, Regional Director of the Commission's Midwest Regional Office, said, "By failing to inform investors that it deviated from the AXP Funds' prospectus disclosures in allowing certain known market timers to continue trading in and out of the funds it advised, AEFC ignored its responsibility to treat all fund shareholders fairly and honestly." In addition to the $15 million payment, AEFA has agreed to be censured and to cease and desist from committing or causing violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Section 34(B) of the Investment Company Act of 1940. The Commission's Order further requires AEFC to comply with certain undertakings. AEFC has consented to the issuance of the Commission's Order without admitting or denying the findings contained therein. The Commission's action was filed contemporaneously with a related action by the Minnesota Division of Securities. # # # For further information contact: Merri Jo Gillette (312) 353-9338Regional Director, Midwest Regional Office Robert J. Burson (312) 353-7428Senior Associate Regional Director, Midwest Regional Office Additional materials: Administrative Proceedings IA-2452 and IA-2451 http://www.sec.gov/news/press/2005-169.htm Home | Previous Page Modified: 12/01/2005
AMERICAN EXPRESS FINANCIAL CORPORATION, NOW KNOWN AS AMERIPRISE FINANCIAL, INC., TO PAY $15 MILLION TO SETTLE MARKET TIMING CHARGES FOR IMMEDIATE RELEASE 2005-169 Washington, D.C., Dec. 1, 2005 - The Securities and Exchange Commission announced settled enforcement proceedings against American Express Financial Corporation, now known as Ameriprise Financial, Inc. (AEFC), a registered investment adviser headquartered in Minneapolis, Minn., related to allegations that AEFC acted contrary to prospectus disclosures when it allowed certain shareholders to market time the mutual funds it advised, the American Express Funds (AXP Funds) when the AXP Funds' prospectus disclosures expressly prohibited market timing. As part of its settlement with the Commission, AEFC will pay $15 million in disgorgement and civil penalties, all of which will be placed in a Fair Fund for distribution to certain shareholders of the AXP Funds. AEFC also agreed to certain undertakings, including making annual presentations to its Board of Directors and the AXP Funds' Boards of Directors about the adequacy of its policies and procedures on market timing. The Commission's Order finds that in January 2002 AEFC changed the prospectus disclosures for the AXP Funds to specifically prohibit market timing. Despite this express prohibition against market timing, AEFC still permitted certain market timers to continue market timing the AXP Funds for an additional time period that lasted approximately six to eight months. In addition, after changing the AXP Funds' prospectus disclosures, AEFC did not put in place any procedures to monitor or prevent employees of AEFC and related companies from market timing the AXP Funds through their 401(k) accounts or disclose to investors that there were no such procedures until October 2003. Finally, even after anti-market timing language was added to the prospectuses of the variable annuity products sold by AEFC in May 2002, AEFC allowed a known market timer to continue to market time these variable annuity products until October 2003 without disclosing this exception to other investors. Merri Jo Gillette, Regional Director of the Commission's Midwest Regional Office, said, "By failing to inform investors that it deviated from the AXP Funds' prospectus disclosures in allowing certain known market timers to continue trading in and out of the funds it advised, AEFC ignored its responsibility to treat all fund shareholders fairly and honestly." In addition to the $15 million payment, AEFA has agreed to be censured and to cease and desist from committing or causing violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Section 34(B) of the Investment Company Act of 1940. The Commission's Order further requires AEFC to comply with certain undertakings. AEFC has consented to the issuance of the Commission's Order without admitting or denying the findings contained therein. The Commission's action was filed contemporaneously with a related action by the Minnesota Division of Securities. # # # For further information contact: Merri Jo Gillette (312) 353-9338Regional Director, Midwest Regional Office Robert J. Burson (312) 353-7428Senior Associate Regional Director, Midwest Regional Office Additional materials: Administrative Proceedings IA-2452 and IA-2451 http://www.sec.gov/news/press/2005-169.htm Home | Previous Page Modified: 12/01/2005