Amvescap, the Anglo-American fund manager, revealed yesterday that it had set aside more than £20m to cover the costs of an investigation by US authorities into examples of controversial market timing trading within its business.
The company included a £22.8m exceptional charge in its full-year results to cover legal costs and other advice after the launch of the probe into the American arm of its subsidiary, Invesco.
The sum does not cover any provision for possible fines by US regulators, or any funds to compensate investors who may have lost out.
Four of Invesco's senior executives have been accused of sanctioning market timing deals with as many as 60 hedge funds and other parties.
Market timing, a form of arbitrage whereby sophisticated investors can take advantage of delays in the pricing of funds, is not illegal. But it iscontroversial because it usually has a negative impact on long-term investors, often private individuals.
The scandal over improper trading of mutual fund shares has seen more than 50 people fired or asked to resign since Eliot Spitzer, the New York attorney general, launched his investigation into trading abuses in September last year.
Potential legal action against Amvescap partially overshadowed results which were greeted well in the City.
In the three months to 31 December, profits rose 6 per cent to £82m. For the full year, funds under management rose 11 per cent to $370.6bn (£208bn).
Charles Brady, the chairman of Amvescap, said: "These positive factors have been overshadowed by pending regulatory investigations in the United States, which we are working to resolve expeditiously in 2004."
A number of high-profile companies have already sought to settle out of court. Sun Life Financial took a charge last week of almost $160m for a possible US settlement.
So far, no fund managers have faced any warnings about legal action over market timing in the UK. However, the Financial Services Authority began an investigation in December and is due to report its findings in the next two weeks.Reuse content