Waddell & Reed, Inc., et al.
On July 24, 2006, the SEC instituted administrative and cease-and-desist proceedings against Waddell & Reed, Inc., Waddell & Reed Investment Management Company and Waddell & Reed Services Company (Respondents). The SEC alleged that from at least as early as 1995 through 2003, Respondents permitted a number of individuals and entities (Timers) to market time certain funds in the Waddell & Reed mutual fund complex (W&R Funds), subject to certain limitations on the number, amount and frequency of trades. Despite prospectus disclosures and internal procedures that Respondents had in place to prevent or limit the market timing, Respondents permitted the Timers to time in the W&R Funds even though they knew that the Timers were harming the funds by diluting other investors' returns.
As part of the settlement, Respondents paid $52 million into a Fair Fund, consisting of $40 million in disgorgement and $10 million in a civil money penalty, for distribution to investors who suffered losses because of the market timing by the Timers. For more information on the SEC's action, you can read In the Matter of Waddell & Reed, Inc., Waddell & Reed Investment Management Company, and Waddell & Reed Services Company, Exchange Act Release No. 34-54193 (July 24, 2006) at http://www.sec.gov/litigation/admin/2006/34-54193.pdf.
Under the terms of the SEC's Order, the Independent Distribution Consultant submitted to the SEC a distribution plan for the distribution of the Fair Fund containing $52 million to investors. On April 23, 2013, the SEC published a Notice of Proposed Plan of Distribution and Opportunity for Comment, which specifies how copies of the proposed Distribution Plan can be obtained, and describes the process by which persons may comment on the Plan. Those who wish to provide their comments on the proposed Distribution Plan must submit them, in writing, no later than May 23, 2013. You can review the Notice at http://www.sec.gov/litigation/admin/2013/34-69437-pdp.pdf.
After publication and comment, the proposed Distribution Plan will be submitted to the SEC for approval.