The financial services group Old Mutual yesterday became the second British company to be dragged into the high-profile investigation of the fund management industry by New York attorney general Eliot Spitzer.
The company, listed in London, said the founders of its US-based Pilgrim Baxter asset management business had quit following an internal probe into the business's trading practices. Old Mutual said it would pay Harold Baxter and Gary Pilgrim about $69m (£41m). The cash is for stock options and to buy them out of their revenue-sharing agreement. The two will not receive any compensation for their loss of office.
Old Mutual is the latest company to be put under the microscope over the way it runs its fund management business after Mr Spitzer, America's chief inquisitor into murky Wall Street practices, opened his investigation into the country's investment companies.
Earlier this week it emerged that Amvescap, the Anglo-American fund management giant, was also being scrutinised. The company denied that it had received notice that Mr Spitzer's office was about to start legal proceedings, but said it was "cooperating fully with the regulators' review".
While Amvescap has so far not penalised any of its own employees, a number of companies which are involved in the Spitzer probe have attempted to curb possible legal action against them by initiating their own probes.
Alliance Capital Management, owned by French insurer Axa, terminated the contracts of two senior executives on Tuesday for allegedly permitting the improper trading of mutual fund shares.
Pilgrim Baxter said it had launched an internal review, which had "brought into focus conduct that was not, in our view, consistent with the highest standards of professional and ethical behaviour".
The probe revealed Mr Pilgrim had a passive investment in a partnership which actively traded in Pilgrim-affiliated funds from March 2000 to December 2001, when the firm moved to halt this practice.
Mr Pilgrim also had a beneficial ownership in the partnership, and Pilgrim Baxter said he and Mr Baxter were aware that it actively traded in certain Pilgrim Baxter funds.Reuse content