SEC Announces Start of $321 Million Fair Fund Distribution to Investors Harmed by Alliance Capital Market Timing
FOR IMMEDIATE RELEASE
Washington, D.C., Feb. 6, 2009 — The Securities and Exchange Commission announced today that it has completed the first in a series of disbursements from a Fair Fund that will return approximately $321 million to more than two million investors who were harmed by undisclosed market timing in the Alliance mutual funds complex.
The Fair Fund resulted from an SEC enforcement action charging Alliance Capital Management, L.P. with unlawful conduct for allowing widespread market timing trading between January 2001 and September 2003 in Alliance mutual funds, contrary to those funds' public disclosures. During this period, Alliance Capital, now known as AllianceBernstein, L.P., served as the investment adviser to the Alliance mutual funds. More than $46 million in Fair Funds have been distributed to approximately 300,000 investors in this first disbursement.
"This Fair Fund distribution further demonstrates the SEC's commitment to distributing disgorgement and penalties from those who violate the securities laws to the investors they harmed," said Kay Lackey, Associate Regional Director at the SEC's New York Regional Office.
Dick D'Anna, Director of the SEC's Office of Collections and Distributions, added, "This distribution adds to the more than $4 billion already returned to harmed investors since 2002 and will be followed by the remaining tranches. The SEC staff remains focused and committed to returning Fair Funds to harmed investors."
The Sarbanes-Oxley Act of 2002 gave the SEC authority to increase the amount of money returned to injured investors by allowing civil penalties to be included in Fair Fund distributions. Prior to SOX, only disgorgement could be returned to investors.
In 2004, the SEC brought and settled public administrative and cease-and-desist proceedings against Alliance Capital for violations of the federal securities laws in connection with market timing in the Alliance mutual funds. Among other things, the Commission ordered Alliance Capital to pay $250 million in disgorgement and civil penalties for distribution through a Fair Fund. In addition to disgorgement and civil penalties, Alliance Capital also consented to a cease-and-desist order and a censure, and agreed to undertake certain compliance and mutual fund governance reforms. In 2005, the SEC brought and settled public administrative and cease-and-desist proceedings against former Alliance Capital officers, Gerald T. Malone, John D. Carifa and Michael J. Laughlin, for their roles in the "timing capacity" arrangements at Alliance. Each was found to have aided and abetted Alliance Capital's unlawful conduct and consented to pay a penalty. Penalties from these three officers totaled $850,003, which was added to the Fair Fund.
In 2006, the SEC settled a civil injunctive action filed in 2003 against Daniel Calugar and Securities Brokerage, Inc., alleging that the defendants defrauded mutual funds investors, including Alliance mutual funds investors, through late trading and market timing. As part of the settlement, Calugar agreed to pay $153 million in disgorgement and civil penalties, of which the $70.38 million representing harm to Alliance mutual funds investors was transferred to the Alliance Capital Fair Fund for distribution. Thus, the total assets for distribution under the Fair Fund are approximately $321 million.
The Fair Fund Administrator responsible for distribution is Rust Consulting, Inc. Investor questions regarding the distribution may be directed to Rust at (888) 222-8536. Information regarding the distribution can also be obtained at http://www.abfairfund.com.
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Distribution Plan: http://www.sec.gov/litigation/admin/2008/34-57825-dp.pdf
Order Approving the Distribution Plan:
January 15, 2004 Amended Order Instituting Administrative and Cease-and-Desist Proceedings against Alliance: http://www.sec.gov/litigation/admin/ia-2205a.htm
April 28, 2005 Order Instituting Administrative and Cease-and-Desist Proceedings against John D. Carifa: http://www.sec.gov/litigation/admin/ia-2379.pdf
April 28, 2005 Order Instituting Administrative and Cease-and-Desist Proceedings against Gerald T. Malone: http://www.sec.gov/litigation/admin/ia-2378.pdf
April 28, 2005 Order Instituting Administrative and Cease-and-Desist Proceedings against Michael J. Laughlin: http://www.sec.gov/litigation/admin/34-51624.pdf
December 24, 2003 SEC Litigation Release Announcing Civil-Injunctive Action against Daniel Calugar and Securities Brokerage, Inc.: http://www.sec.gov/litigation/litreleases/lr18524.htm
Complaint in the above-referenced matter: http://www.sec.gov/litigation/complaints/comp18524.pdf
January 10, 2006 SEC Litigation Release Announcing Settlement with Daniel Calugar: http://www.sec.gov/litigation/litreleases/lr19526.htm