Amvescap faces shareholders' ire

Shareholders call on UK fund manager to settle dispute over improper trading

Amvescap, the UK's largest listed fund manager, is facing mounting pressure from shareholders to settle its dispute with US regulators over allegations that fund managers were involved in improper trading practices.
The company - part of the FTSE 100 index but headquartered in Atlanta - is embroiled in a legal battle with the Securities and Exchange Commission and Eliot Spitzer, the New Yor}: state attorney-general.
Some big shareholders, want Amvescap to back down in the battle over regulators' claims that Invesco Funds Group, its Denver and facilitated the activities of market timers.
Amvescap has denied any wrongdoing, and it is intending to fight what it has called the "unmerited" charges. Analysts point out that market timing is not illegal.
But if Amvescap declines to strike a compromise deal with the regulators, it could end up in a Colorado court later this year. This prospect worries shareholders already alarmed by the number of investors withdrawing money from the company's savings products.
One major shareholder, with a stake. of about 1 per cent, said: "We are surprised they are defending themselves so vigorously. We are concerned that they are taking a course of action that is out of step with the rest of the industry. We would like to see them pay the money, get the regulators- off their back, and then we can all move on. We would not want them to go through the courts."
Another investor, ranked among Amvescap's top, 15
shareholders, said: "We think they should take it on the chin and then move on."
Last week, Amvescap's share price rose by 6.5 per cent on the day a report published by Morgan Stanley, the US bank, predicted that the company would have to settle with the regulators.
If Amvescap declines to strike a compromise with the regulators, it could end up in a Colorado court later this year.
This prospect worries shareholders.
Huw van Steenis, Morgan Stanley's chief fund management analyst, said Amvescap could have to pay as much as $100m (£54.1m) if it opted to terminate legal proceedings and settle with the regulators. This would cover any profits taken by the market timers plus any punitive fine charged by the regulator.
But he expected that such a move - by removing the
uncertainty of court proceedings - would be reflected in an improved share price on the London Stock Exchange.
Janus Capital has seen'a 4 per cent rise in its share price in the three weeks since it voluntarily agreed to pay investors $31.5m to compensate for gains made
through improper trading activity.
In a goodwill gesture, it also offered to terminate its "soft commission" practice - a measure that will increase its business costs by $9m per year.
Janus is now awaiting a possible fine, which Morgan Stanley thinks will take the total payment to $50m.
Alliance Capital, owned by Axa, the French insurer, has also seen better times since it agreed to pay around $250m - a sum covering returned profits and a penalty payment. It has also promised to reduce its mutual fund fees by 20 per cent.
Amvescap is due to report its latest trading figures next month. Morgan Stanley estimates that the company's Invesco operation suffered a $600m outflow of assets in December. This compares with just $90m in October and November.
A costly settlement with US regulators would hit Amvescap's bottom line at a time when it is facing other regulatory pressures in Europe. Under new measures, drawn up by European regulators, Amvescap may have to meet a capital adequacy test based on tangible net assets. If this happened, Amvescap would almost certainly fail the test. It has said that it would relocate to Bermuda in order avoid this.
Amvescap declined to comment.