The settlement will likely be announced within days, one source said. The company, which is scheduled to post first-quarter earnings on Wednesday, announced the resignation of Chief Executive Mark Whiston last week.
The settlement is expected to be made with New York Attorney General Eliot Spitzer’s office, the Securities and Exchange Commission and Colorado Attorney General Ken Salazar’s office, sources said. One source said the agreement would require Janus to pay more than $200 million and to reduce the fees it charges investors — a provision Spitzer has required in prior settlements.
Officials at the two attorneys general offices and the SEC declined to comment. Denver-based Janus did not return calls.
Janus has already said it would reimburse fund shareholders $31.5 million for abusive trading of its funds, and has taken a series of measures to improve corporate governance at the company.
The settlement would come seven months after Spitzer named Janus when he announced a sweeping probe of the $7.5 trillion mutual fund industry. Regulators are probing trading practices that they claim cost billions of dollars to investors, many of whom rely on the funds for retirement.
Practices being probed include market timing, or attempting to profit from the rapid buying and selling of shares in the same mutual fund, and illegal late trading, trading stocks at expired prices after the markets have closed.
Janus was one of four financial companies named in a $40 million settlement between Spitzer’s office and hedge fund Canary Capital Partners LLC in September. Spitzer’s complaint said Janus permitted Canary to make trades that were not allowed to smaller investors, in return for large investments in Janus funds that generated substantial management fees.
Bank of America Corp. (BAC.N: Quote, Profile, Research) and FleetBoston Financial Corp. (FBF.N: Quote, Profile, Research) agreed to pay $675 million last month to resolve charges from the same probe. Two other companies named in the original settlement, Bank One Corp. (ONE.N: Quote, Profile, Research) and privately held Strong Capital Management Inc., have not reached settlements.
Steve Scheid, a former executive at Charles Schwab Corp., was named to succeed Whiston as Janus CEO.
The trading scandal, which has led to half a dozen mutual fund chief executives to resign, and has also claimed several Janus executives and employees.