Deutsche Asset Management finalizes market timing settlement with Securities and Exchange Commission and New York Attorney General
The activities covered by the settlements include certain allegedly improper market timing arrangements. All of the allegedly improper market timing arrangements originated in businesses that existed prior to the currently constituted DeAM organization, which came together as a result of various mergers of the legacy Scudder, Kemper and Deutsche fund groups. The arrangements were terminated prior to the start of the regulatory investigations that began in the summer of 2003. No current DeAM employee approved the allegedly improper market timing arrangements.
DeAM is settling with the NYAG and SEC under two separate proceedings. Under the terms of the settlement with the NYAG, DeAM has consented, without admitting or denying any wrongdoing, to a payment of approximately $122 million. The settlement includes approximately $102 million in disgorgement and/or restitution and a civil money penalty in the amount of $20 million. Under the SEC settlement, DeAM has consented, without admitting or denying any wrongdoing, to disgorgement and/or restitution and a civil money penalty in the amount of $17 million, which will be deemed to be paid through the payments made under the NYAG order. Importantly, the entire approximately $122 million of the settlement payment by DeAM will be distributed for the benefit of shareholders of the affected funds in accordance with a plan to be developed by a distribution consultant.
In addition to the payments, DeAM has agreed to certain undertakings regarding the conduct of its business in the future and the governance and oversight of the DWS funds, including, among other things, maintaining existing management fee reductions for certain funds for a five year period and the formation of Code of Ethics Oversight and Internal Compliance Controls Committees.
DeAM also continues to discuss a settlement with the Illinois Secretary of State regarding market timing matters. As previously disclosed, DeAM expects a settlement with the Illinois Secretary of State to provide for investor education contributions totaling approximately $4 million and a payment in the amount of $2 million to the Securities Audit and Enforcement Fund.
Deutsche Asset Management and its affiliates fully cooperated with the regulators and have addressed the issues that were identified.
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