agreed to pay $225 million in penalties and fee reduction to settle a regulatory investigation into the firm's role in the mutual fund trading scandal.
The deal, announced after the close of trading, had been expected and led the company to report a first-quarter loss Tuesday night. The agreement comes about a week after Mark Whiston stepped down as chief executive of the mutual fund company.
In the deal with regulators from New York, Colorado and the
Securities and Exchange Commission
, Janus will pay $50 million in restitution, $50 million in fines and $125 million in fee reductions. Regulators investigating the $7.6 trillion mutual fund industry found evidence that Janus had permitted a number of select investors, including the now infamous Canary Capital Partners hedge fund, to engage in market timing.
Janus was one of the first mutual fund companies to come under regulatory scrutiny in the investigation begun last summer by New York Attorney General Eliot Spitzer.
Market-timing, or frequent trading in mutual fund shares, can erode the value of a fund's assets. It is one of the main trading abuses uncovered by regulators during the far-reaching inquiry that has touched many corners of the mutual fund industry.
"From now on market timers will no longer be given special access and permitted to profit at the expense of long term investors," said New York Attorney General Eliot Spitzer, in a statement announcing the deal.
The trading scandal has cost top executives at other mutual fund companies their jobs, and there had been much speculation that Whiston ultimately would be forced to step down. Whiston will continue as a consultant at Janus until the end of the year.
Janus, which previously set aside $31 million to cover investor losses due to market-timing activity in some of its funds, said Tuesday that the settlement resulted in a first-quarter loss of $19.3 million, or 8 cents a share. A year ago, the firm earned $38.6 million, or 17 cents a share.
The cost of paying for the settlement was included in a $59 million charge Janus took in the quarter. Of that amount, the settlement impaired earnings by 21 cents a share. Other charges totaled 6 cents a share.
The deal with Janus should put the total settlements in the mutual fund trading scandal above the $2 billion mark.