Invesco, AIM Advisors Settle Allegations

Invesco Funds Group and a sister company agreed Tuesday to settle allegations of improper trading in a proposed deal that would send $375 million to investors who were harmed by the practice.

Invesco of Denver would pay $325 million to resolve litigation alleging it permitted excessive market timing in its funds, Colorado Atty. Gen. Ken Salazar said. A sister company, AIM Advisors Inc. of Houston, agreed to pay $50 million. Invesco and AIM also agreed to reduce their management fees by $75 million over the next five years.

The $375 million in payments would go to investors in what Salazar called one of the largest settlements to date in the market-timing scandal that has swept through the $7-trillion mutual fund industry in the last year.

“I believe this sends the strongest message yet that mutual fund companies will be held accountable for behavior that harms consumers and average shareholders,” Salazar said.

Amvescap, the London-based parent of the two companies, did not acknowledge wrongdoing. It said it already had taken steps to better monitor trading activities and would hire an independent consultant to oversee distribution of the money to shareholders.

The agreements would resolve pending investigations by attorneys general in Colorado, New York and Georgia and the Securities and Exchange Commission. They are subject to final approval of the full SEC and the signing of a consent decree by all parties.

The settlement would not include former Invesco Chief Executive Raymond Cunningham, who has been charged with fraud by the SEC for allegedly allowing certain clients to market-time Invesco funds.

Regulators had accused the company of an elaborate scheme that defrauded shareholders by seeking out wealthy investors for market-timing arrangements -- quick in-and-out trading that is legal but prohibited by many funds because it can skim profits from longer-term shareholders.

The SEC and state regulators said Invesco and Cunningham had allowed the big clients to engage in market timing even though its policies discouraged it.

The prospectuses for Invesco funds restricted fund trades to four a year, but authorities said some clients were exempted as part of a “special situations” program that became an increasing part of Invesco’s strategy in 2001 as the market was falling.

According to Salazar, between early 2001 and the middle of last year more than 40 such favored investors conducted market-timing trades that totaled more than $58 billion and diluted the returns earned by other shareholders.

Salazar said that Invesco representatives initially said there were no damages to investors as a result of market timing but that this view changed over time.