Updated from 3 p.m. ESTThe Securities and Exchange Commission and the office of New York Attorney General Eliot Spitzer charged Invesco and its chief executive, Raymond R. Cunningham, with civil securities fraud Tuesday, alleging that the mutual fund firm allowed several hedge funds to make improper trades in breach of the firm's fiduciary duty. The SEC and Spitzer's office say Invesco "fraudulently accepted investments by dozens of market-timers in Invesco mutual funds" to enhance its management fees. In doing so, Invesco violated its market-timing policies as stated in its prospectuses, the complaint said. Invesco and Cunningham "willingly sacrificed the interests of mutual fund shareholders when market-timers dangled the prospect of higher management fees in front of them," said Stephen Cutler, the director of the SEC's enforcement division. "By granting special trading privileges to selected customers, they readily violated the fiduciary duty they owed to all shareholders and rendered meaningless the funds' prospectus disclosures on market-timing." Invesco, a Denver-based unit of the United Kingdom's Amvescap ( AVZ), wasn't immediately available for comment. The charges have been expected for weeks and Invesco has said it will vigorously defend its actions. TheStreet.com
Invesco is charged with violating antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940 -- and Cunningham is charged with violating or aiding and abetting Invesco's violations. Invesco and Cunningham are also charged with filing false or misleading registration statements with the SEC. The complaint "seeks permanent injunctions against
Invesco and Cunningham, disgorgement of their ill-gotten gains plus prejudgment interest, and civil penalties." The complaint was filed in the U.S. District Court for the District of Colorado.