CROWE CHIZEK NAMES MCGRATH TO LEAD FINANCIAL INSTITUTIONS GROUP: National firm Crowe Chizek & Co. has named J. Kevin McGrath managing executive of its Financial Institutions Group, succeeding Carl Bossung.
McGrath, who has been with Crowe Chizek since 1976, is based in the firm’s Indianapolis office. As managing executive, he will lead the 350-employee group, which serves more than 1,000 private and public financial institutions and financial services-related entities. Crowe Chizek ranks second nationally among accounting firms in the number of publicly traded financial institutions it audits.
McGrath has more than 25 years of experience working with financial institutions, providing accounting, auditing and consulting advice. He is a past member of the American Institute of CPAs’ National Committee for Banks and its Performance Measurement Committee.
Bossung, who held the post for 15 years, will stay on serving clients and will maintain involvement in various firm-wide committees, Crowe Chizek said. During Bossung’s tenure, FIG grew from $9 million to $57 million in revenue, from 70 to 350 staff, and from 200 to 1,000 clients.
PRINCIPAL SELLS MORTGAGE BIZ TO CITIGROUP: The Principal Financial Group Inc. sold its mortgage banking business to Citigroup for $1.26 billion, in a move aimed at sharpening its focus on its core business of providing retirement and employee benefit solutions for small and midsized companies. Under the terms of the agreement, Citigroup will acquire the stock of Principal Residential Mortgage Inc., and Principal Residential Mortgage employees will transfer to Citigroup at the close. The transaction, which has been approved by Principal’s board of directors, is expected to close in the third quarter, subject to regulatory approval.
“In addition to greater focus on our core businesses, we go forward from an improved capital position, with better financial flexibility and greater stability of earnings,” J. Barry Griswell, Principal’s chairman, president and chief executive, said in a statement.
The Fortune 500 company reported $149.8 billion in assets under management as of March 31. Principal, which expects after-tax net proceeds of about $710 million, said that it plans to use the money for growth in its core businesses, strategic acquisitions and share repurchases. The company’s board this week authorized the repurchase of up to $700 million of the company’s outstanding common stock. Principal said that it has completed approximately $253 million of the $300 million share repurchase program authorized by the board last May.
FPA RAILS AGAINST SEC PROPOSAL: The Financial Planning Association has come out against a Securities and Exchange Commission proposal that would single out 12b-1 fees for deduction directly from mutual fund shareholders accounts.
The SEC proposed amending a rule to shift 12b-1 fees that are paid to broker/dealers and investment advisors from being an asset-based charge to a direct deduction from shareholders’ accounts. Under the SEC’s plan, investors would pay the fees through an automatic redemption of fund shares, and the amount of the payment would be shown on their quarterly statements.
In its comment, authored by FPA director of government relations Neil Simon, the FPA said, “By harshly illuminating 12b-1 fees with a laser-like beam, the approach suggested by the SEC is likely to shroud the context in which these fees appear. By directing disproportionate attention on 12b-1 fees, investors may lose sight of the more important issue, i.e., the total costs and expenses of the investment and the expense ratio.”
The FPA said that any requirement that fees be deducted directly from investor accounts “will lead to complicated tax liabilities for investors” and that the additional record-keeping requirements would add to “an already considerable administrative burden.”
In a separate comment, the FPA lent its support to an SEC proposal that would require mutual funds to impose a 2 percent fee on any redemption of fund shares within five days of their purchase.
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