Press Releases
| For Immediate Release |
|
| May 20, 2004 |
Contact: Cheryl Weiss
(608) 264-7875 |
Wisconsin Department of Financial Institutions Reaches
Settlement with Richard S. Strong
Settlement results in $140 million for investors
(Madison) Secretary Lorrie Keating Heinemann today announced a settlement
agreement between the Division of Securities of the Wisconsin Department
of Financial Institutions (DFI) and Richard S. Strong resulting from the
investigation of his trading activities at Strong Capital Management.
The allegations of improper trading by Strong came to light as part of
an investigation that began with the Canary Hedge Funds' market-timing
practices revealed in September 2003. "The settlement reached today
with Richard Strong and his firm, Strong Capital Management, will return
$140 million to investors and set up a strict corporate governance structure
at Strong to ensure that these activities do not happen again," Secretary
Keating Heinemann said.
Under the terms of the settlement, the DFI Division of Securities will
revoke Richard Strong's Investment Adviser Representative and Securities
Agent licenses as well as the licenses of Thomas Hooker and Anthony D'Amato.
The settlement also puts controls in place at Strong Capital Management
to guard against improper trading in the funds.
The Wisconsin DFI settlement is based upon evidence that Strong was allowed
to frequently trade in his personal accounts in multiple Strong Funds.
The DFI investigation confirmed that Strong's trades in these funds were
inconsistent with the long-term investment strategies outlined in the
funds' prospectuses.
Pursuant to the enforcement actions of the Wisconsin DFI, New York Attorney
General and the Securities and Exchange Commission ("SEC"),
Richard Strong and Strong Capital Management agreed to pay $140 million
to be distributed back to investors. The SEC order calls for an independent
distribution consultant to oversee the distribution of the restitution
funds to investors. "As the primary regulator for mutual funds, the
SEC is the appropriate authority to handle this restitution process,"
Patricia Struck, Administrator of the DFI Division of Securities, explained.
"We are pleased to bring closure to this investigation for Wisconsin
investors and to announce that under the settlements reached today, all
penalty monies will be returned to investors in the Strong mutual funds"
DFI Secretary Lorrie Keating Heinemann stated. Wisconsin investors represent
approximately 20 percent of the $27.4 billion Strong Capital Management
has under management. "Considering the number of Wisconsin investors
in Strong funds, this settlement reflects the focus on investor protection
that is our goal here," Keating Heinemann added. "I would especially
like to thank DFI attorneys Patricia Struck and David Cohen, as well as
Eric Wilson in the Wisconsin Attorney General's office for their professionalism
and expediency in handling this investigation," she added.
This enforcement action has been coordinated with the Securities and
Exchange Commission and The Office of the New York Attorney General.
The DFI Division of Securities has jurisdiction over 90,632 licensed
securities agents, 1,817 broker-dealers, 186 state licensed investment
adviser firms and 1,234 investment adviser representatives. In 2003, the
Division of Securities at DFI issued 213 administrative orders resulting
from 86 separate investigations and returned over $4 million to Wisconsin
investors.
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