Plan sponsors are pushing their service providers that are tainted by the mutual fund scandal to settle with the SEC and New York State Attorney General Eliot Spitzer.
"We talked to the firms and told them we would close the option if the situation wasn't settled satisfactorily. That was our threat," said Tony Johnson, chief investment officer at the Philadelphia Public Employees' Retirement System, which has funds from Janus, Denver, and MFS Investment Management, Boston, in its $345 million 457 plan. He pointed out that Janus has settled, and MFS is still in negotiations. Mr. Johnson believes the pressure on Janus encouraged the firm to settle the charges.
Officials at the $6.3 billion New York State Deferred Compensation Fund, Albany, have informed the affected fund companies whose funds are among its investment options that if charges are not satisfactorily settled, New York might close the funds to participants, said Julian Regan, executive director. This obviously has put pressure on some firms to settle, he acknowledged.
"We've had regular contact with the (tainted) firms in writing and face-to-face meetings about their regulatory status. We've asked them about what corrective action they're taking — and that could mean a settlement of the charges."