REGULATORS TO DISTRIBUTE $30M TO FUND INVESTORS

UPDATE: Regulators To Distribute $30 Million To Fund Investors
Dow Jones
April 25, 2008: 03:12 PM EST

WASHINGTON (AP)--The Securities and Exchange Commission said Friday it will distribute more than $30 million to about 250,000 investors in a boutique mutual fund firm charged with allowing excess trading.

The funds stem largely from a settlement the SEC reached in 2004 with RS Investments, a mutual fund firm based in San Francisco, and two of its executives, G. Randall Hecht and Steven M. Cohen.

The firm agreed as part of the settlement to pay $25 million in disgorgement of profits and civil penalties, without admitting or denying wrongdoing.

The rest of the $30.6 million distribution includes $3.3 million in disgorgement and penalties paid by several units of Bank of America Corp. (BAC) on a related matter, the SEC said, as well as interest.

RS Investments was charged in 2004 by the SEC and then-New York State Attorney General Elliott Spitzer with allowing certain large investors to make millions of dollars in profits by rapidly trading shares of its mutual funds.

Quick trading of mutual fund shares can take advantage of inefficiencies in fund share pricing and can reduce gains for long-term investors.

NOTE: QUICK TRADING OF MUTUAL FUNDS CREATES MILLIONS OF DOLLARS IN PROFITS FOR BIG INVESTORS.

The SEC began cracking down on the practice several years ago. On Thursday, the agency said that Gabelli Funds LLC agreed to pay $16 million to settle similar charges of rapid trading in one of its funds.

Mario Gabelli, a high profile mutual fund manager, is chief executive of Gamco Investors Inc. (GBL), which owns Gabelli Funds.

The SEC is also suing Gabelli's son, Marc Gabelli, and Bruce Alpert, the chief operating officer of Gabelli Funds, both of whom said Thursday they will fight the SEC's charges in court.

(END) Dow Jones Newswires
04-25-08 1512ET
Copyright (c) 2008 Dow Jones & Company, Inc.

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