NEW YORK: As the $7 trillion mutual-fund industry continues to grapple with what has begun to look like the worst corporate reputation crisis in its history, at least one major firm has retained a major crisis PR firm to help it deal with the scandal. Fred Alger Management is currently working with financial and crisis agency Kekst & Co.
New York Attorney General Eliot Spitzer turned his sights to the mutual-fund industry earlier this year, aiming to eliminate market timing, late trading, and other practices that benefit large, wealthy investors at the expense of smaller ones. Long seen as the trustee of much of main street America's long-term savings, Spitzer's investigation has threatened to undermine the public's trust in much of the fund industry.
Spitzer's investigation into Alger's trading practices resulted in a guilty plea for James Connelly Jr., a vice chairman who was charged with evidence tampering during the probe.
Immediately after the conviction, Alger released a statement from the company and issued a letter to its clients stating the company's intent to cooperate with Spitzer's investigation, as well as conduct its own internal review of its policies. Kekst executives led the media effort following the release.
"Effective immediately, we will not permit market timing in our funds," the statement read.
While it is unclear whether other firms have hired outside counsel, almost all have sought to console investors about the scandal by posting letters and releases on their websites, as well as mailing letters to individual customers.
One company at the center of the controversy is Bank of America, which fired several employees after the probe was announced, including its mutual-fund head. That firm sent a letter to its fund investors shortly after the probe was announced. In the letter, it listed for shareholders steps it was taking to "merit [their] continued confidence."