AMERIPRISE TO SETTLE TRADING CHARGES: Ameriprise Financial - the entity spun off by former parent American Express - and its broker/dealer arm agreed to pay $57.3 million to settle charges of illegal trading and brokerage misconduct.The Securities and Exchange Commission charged that Minneapolis-based Ameriprise Financial Services - the company's broker/dealer - failed to "adequately" disclose millions in revenue-sharing payments that it received from a group of mutual fund companies dating back to 2001.
Two months ago, Ameriprise agreed to pay $15 million to settle charges that it allowed shareholders to execute "market timing" deals in shares of mutual funds of which the company served as an advisor.
Ameriprise Financial Services will pay an additional $30 million to the SEC and $12.3 million to brokerage regulator NASD.
FIDELITY SAYS HURRICANES, ECONOMY BOOSTED CHARITABLE GIVING IN '05: Hurricane relief and a strengthening economy fueled a significant increase in charitable giving in the first 10 months of 2005, according to the Fidelity Charitable Gift Fund, which recorded a 33 percent increase in contributions, to $467 million, compared with the same period in 2004.
Gifts of appreciated stock increased by 31 percent and donors have established nearly one-third more new Fidelity Giving Accounts. Overall grants to nonprofit organizations from the Gift Fund totaled $629 million during the first 10 months of the year, a 29 percent rise over the same period of one year ago.
FISERV ISS ACQUIRES ARROWHEAD TRUST SELF-DIRECTED ASSETS: Fiserv Investment Support Services, the nation's largest independent custodian and a unit of Fiserv Inc., has acquired the self-directed IRA assets of Arrowhead Trust Inc., a transfer of roughly 1,000 accounts valued at $48 million in assets. Terms were not disclosed.
The Arrowhead accounts hold both traditional investments - i.e. mutual funds - and alternative investments such as private equity, real estate, mortgages and trust deeds.
With the acquisition, Fiserv ISS now has 320,000 accounts and custodian accounts valued at $38.3 billion.
ATI, headquartered in California, was established in 1995 and is a wholly owned subsidiary of Arrowhead Credit Union.
RESEARCHER SAYS SOX MATTERS TO INVESTORS: Investors punish firms that disclose internal control weakness as required by Sarbanes-Oxley provisions, but having a Big Four auditor mitigates the negative price hit, according to new research out of Indiana University.
The findings appear in two separate research papers by Leslie Hodder, assistant professor of accounting at Indiana University's Kelley School of Business. Hodder frames those papers as a rebuke to arguments that the provisions are a waste of an accounting firm's time and money on issues that are of no consequence to investors.
"If that's true, we shouldn't see the market response to a firm's disclosure of material weakness that we did," Hodder said in a statement. "Instead, our research shows that the market does care."
In a project co-authored with Messod Beneish and Mary Billings, also of Indiana University, Hodder found "significant abnormal negative returns," in the range of 1.5 to 2 percent of market capitalization, over three trading days for 336 firms that disclosed internal control weaknesses in 2004, as required by SOX regulations.
The negative reaction occurs even when auditors are not saying that they found anything wrong with the numbers, Hodder stresses in the paper. In these cases, auditors are only saying that there was a problem with the process of arriving at those numbers. Hodder speculated that stock prices decline after SOX disclosures because analysts and investors factor in the perceived cost of remediation, and also consider a company with internal control problems to be a riskier investment.
That said, companies reporting internal control problems experienced a milder stock price hit if a Big Four firm conducted the audit. While the negative impact overall might be 1.5 to 2 percent, Hodder found that the impact is about 3 percent when a company doesn't have a large auditor.
