November 3, 2003

Key events in the investigations into the trading practices of hedge funds and the mutual fund industry:

Sept. 3: New York Attorney General Eliot Spitzer launches a probe into hedge fund Canary Capital Partners LLC and the following mutual funds over suspected trading abuses: Bank of America Corp.’s Nations Funds, Bank One Corp.’s Banc One Funds, Strong Capital Management Inc. Janus Capital Group Inc.

Spitzer’s office has also contacted hedge fund Millennium Management LLC; the Vanguard Group, the country’s number two mutual fund company; and Invesco funds.

Sept. 10: Illinois state regulators say they are looking into hedge fund Samaritan Asset Management Services.

Massachusetts and Secretary of State William F. Galvin is probing Prudential Securities and a number of mutual fund companies that were believed to have had contact with Prudential.

The Securities and Exchange Commission also has sent out letters requesting information to firms including Merrill Lynch & Co. Goldman Sachs Group Inc. and number one mutual fund company Fidelity Investments.

Bank of America fires three people accused by Spitzer of helping Canary improperly trade mutual funds.

Sept. 12: Research firm Morningstar Inc. says it has withdrawn indefinitely any recommendations on Janus mutual funds.

Sept. 16: Massachusetts securities regulators subpoena Boston-based mutual fund firm Putnam, the number five US mutual fund company, as part of a probe into short-term trading activity.

Sept. 18: Prudential says federal regulators, Spitzer, and the National Association of Securities Dealers request information about its mutual fund trading.

Sept. 29: The SEC releases staff recommendations that hedge fund managers be registered.

Sept. 30: Alliance Capital, the largest publicly traded US fund company, says it had suspended two executives after finding conflicts of interest related to mutual fund trading.

Janus releases details about improper trading relationships that had led to frequent trading, or market timing, at some of its mutual funds. The deals have all been terminated, Janus says in a letter to fund investors.

Oct. 1: A dozen stockbrokers and managers at Prudential are forced to resign after an internal investigation finds evidence of improper mutual fund trading. Two former managers and 10 stockbrokers who worked in Boston, Garden City, N.Y. and a Manhattan office are asked to resign, it said.

Oct. 2: A former trader for Millennium Partners, a $4 billion hedge fund, pleads guilty to securities fraud in the second criminal case to stem from Spitzer’s probe.

Oct. 3: Merrill Lynch fires three brokers who traded in mutual funds for hedge fund Millennium. The brokers let Millennium capitalize on temporary pricing imbalances.

Oct. 9: Gabelli Asset Management Inc. run by well-known investor Mario Gabelli, says it received a subpoena for information stemming from the probe and that it was cooperating with Spitzer’s request.

Oct. 14: Morgan Stanley, one of Wall Street’s top investment banks, said the SEC may take action over its failure to disclose incentives related to mutual fund sales.

Oct. 15: Bank One executives Mark Beeson, who ran the $102.5 billion One Group mutual funds unit, and John AbuNassar, manager of the bank’s institutional asset management group, leave amid an internal probe of improper trading.

Oct. 16: James Connelly, a former vice chairman of Fred Alger Management Inc. pleads guilty to criminal charges of evidence tampering as part of a probe into whether the money manager permitted illegal trading of mutual fund shares.

Oct. 21: Putnam, a unit of insurer Marsh & McLennan Cos. Inc. says Massachusetts regulators plan to charge it with securities fraud in connection with improper trading.

Oct. 23: Citigroup Inc.’s Smith Barney brokerage said it fired four brokers as a result of an internal probe of trading practices.

Oct. 28: In separate civil complaints, the SEC and Massachusetts regulators say Putnam knew for five years that some of its fund managers were breaking securities laws but looked the other way. Galvin says Putnam, and former Putnam fund managers Justin Scott and Omid Kamshad, committed fraud by skirting written company policies against market timing. Separately, the SEC filed a civil suit against Scott and Kamshad in federal court in Boston, saying their excessive trading hurt other fund investors at Putnam.

Oct. 31: Public pension funds in six states — Massachusetts, New York, Vermont, Pennsylvania, Rhode Island, and Iowa — decide to withdraw more than $4 billion from Putnam. Ten other states are considering such a move.

Material from Globe wire services was used in this report.