'Market timing' scandal costs Amvescap business

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The Independent Online

Amvescap, the giant Anglo-American fund manager, yesterday admitted that concerns about its involvement in the controversial practice of "market timing" and a disappointing investment performance had lost it a substantial number of customers.

The company, which owns Invesco in the UK, also said it was delaying allocating a dividend until it had been told by the US regulatory authorities how much it would be fined over market timing.

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 is controversial because it usually has a negative impact on long-term investors, often private individuals.

Charles Brady, the executive chairman of Amvescap, said: "We're all suffering from the regulatory overhang. Unfortunately we don't seem to be able to find a way out of it at the moment."

He added that he and other senior executives at the fund manager were "doing everything we can" to resolve the matter quickly. Mr Brady is rumoured to be about to step down from his front-line position to become non-executive chairman.

Shares in Amvescap slumped 6 per cent to 285.5p after the company said profits came in at £67m in the second quarter compared with higher estimates by analysts.

Amvescap inadvertently leaked an internal document in May that suggested the fine levied by Eliot Spitzer, the New York attorney general, could be as much as $300m (£167m).

While Amvescap has sought to downplay the figure, mooted in a discussion about the company's debt covenants, analysts fear it is likely to make Mr Spitzer go for at least that much.

Mr Brady attempted to shore up confidence in the business by saying Amvescap had "pretty substantial cash flow", making it likely that a dividend would be paid at its scheduled time, in October.

"I hope we will be able to resolve the regulatory issue and reconsider the dividend on schedule," he said.

The scandal over improper trading of mutual fund shares has seen more than 50 people fired or asked to resign since Mr Spitzer launched his investigation into trading abuses in September last year.