More than one-third of financial advisers surveyed are holding off on investing in any funds managed by Wellington Capital Management and Janus
Capital Group Inc. until they are cleared of any wrongdoing in a recent insider-trading probe, according to an online survey conducted this week by InvestmentNews.
Investigators are conducting criminal and civil probes into possible insider trading at a number of companies. Specifically, investigators are trying to determine if traders at various financial services firms received non-public information from expert networks and third-party research firms.
Last week, FBI agents raided the offices of hedge funds Diamondback Capital Management LLC and Level Global Investors LP. A few days later, Don Chu, a consultant with Primary Global Research LLC, an expert research network, was arrested on insider-trading charges.
Retail mutual fund companies Wellington and Janus have received subpoenas connected to the investigation. While neither of the companies has been accused of any wrongdoing, 37% of financial advisers surveyed by
InvestmentNews said they will postpone investing in the mutual fund firms' portfolios until they are completely cleared.
Even some financial advisers who already do business with Wellington and Janus said they would wait to invest any additional client assets with these firms until the investigation is completed, advisers said.
“I don't know enough yet to be pulling assets from Wellington, but I am going to wait to put more money with them,” said Dan H. Boyce, a registered principal with the Center for Financial Planning Inc., a registered investment advisory firm with $650 million under management.
Sara Sherman, a spokeswoman at Wellington, declined to comment.
Janus spokesman James Aber could not be reached by press time.
Shelley Peterson, spokeswoman for Janus, declined to comment beyond a statement the firm issued last week. At the time, Janus confirmed that it "received an inquiry calling for general information and intends to cooperate fully with that inquiry. Janus maintains rigorous compliance procedures and Janus has confidence in the integrity of its processes and its people," the company said in the statement.
Only 23% of advisers surveyed said they were considering withdrawing client money out of mutual funds involved in the insider trading probe, according to the InvestmentNews poll, which canvassed 308 financial advisers.
Similarly, only 22% of advisers said that they had asked the fund companies they work with to disclose if they use expert research networks. Almost half of those advisers (47.9%) said they were not satisfied with the answers they got from their fund companies.
Most advisers feel that it's just too early to take any action, said one executive at a registered investment advisory firm. “Advisers have enough to worry about these days and this isn't yet at the top of their list,” the executive said.
