Conseco Inc. subsidiaries and a unit of Inviva Inc. agreed to pay $20 million to settle allegations by regulators that they let favored investors improperly trade mutual funds linked to variable annuities, the regulators announced Monday.
The agreement was negotiated jointly with New York Attorney General Eliot Spitzer and the Securities and Exchange Commission. The case was the first linking insurers to so-called market timing, or rapid in-and-out trading in mutual funds, Mr. Spitzer said.
"The conduct identified in this case is particularly troubling because it involves investments marketed to people of modest means for retirement planning,'' Mr. Spitzer said in a statement.
Conseco, which is based in Carmel, Ind., let hedge fund managers make rapid short-term trades in annuity-linked mutual funds from 2000 through April 2003, he said. New York-based Inviva, which bought Conseco's variable annuity unit in October 2002, allegedly continued the practice until late 2003. Variable annuities are tax-deferred retirement savings contracts that include mutual funds.
Hedge funds and other timers invested about $120 million in variable annuities offered by the subsidiaries, dwarfing the assets of other buyers, the SEC said.
The companies agreed to the SEC's cease-and-desist order without admitting or denying the investigation's findings.
