From: "Mark Freeland" 
Newsgroups: misc.invest.financial-plan
Subject: Re: Waddell and Reed Financial Advisors
Date: Tue, 28 Aug 2007 15:14:17 -0500
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"kastnna"  wrote in message 
news:1188323395.776011.163350@50g2000hsm.googlegroups.com...
> Will,
>
> I know they got into trouble a few years back, but I don't recall why.
> I think it had to do with inapporpriate trading. They got hit pretty
> hard for it by Spitzer. Since then I think they have turned a 180 and
> are super-compliance oriented.

Since you mentioned that, I took a quick look around.  Not just a single 
mess, but a couple of different ones, with different types of vehicles.

- Mutual fund timing/short term trading (1995-2003) enabled by Waddell & 
Reed, KS broker dealer, in Waddell & Reed mutual funds: 
http://www.securities.state.ks.us/press/2006/waddellfined7-24-06.htm
(this is probably the Spitzer reference)
 -- $50M to SEC ($40M disgourgement + $10M penalty)
 -- $25M reduction in fund fees over five years (Spitzer agreement - 
$5M/year)
 -- $2M to various states (violating Kansas securities laws) - KS got $145K, 
Alaska got $20K, etc. 
http://www.securities.state.ks.us/press/2006/waddellfined7-24-06.htm 
(settlement with states)
  http://www.dced.state.ak.us/pub/settlement_cases.pdf (Alaska portion)

- Variable annuity switching (national campaign by W&R) 2001-2002: 
http://www.finra.org/PressRoom/NewsReleases/2005NewsReleases/p013886
 -- $5M to NASD (fine)
 -- $11M to customers (restitution for losses incurred by switches)
 -- W&R broker-dealer registration in Missouri suspended 
http://www.sos.mo.gov/securities/orders/AP-05-13.asp

W&R's public statement on the fund timing, and changes it has made (I note 
that they continue to point out that market timing is not prima facie 
illegal, which is true; however the complaint was that they favored certain 
customers): 
http://www.waddell.com/msd/servlet/com.wr.msd.www.newsviews.DownloadFile?id=219

M* also points out that the mutual fund settlement does not name anyone at 
the firm responsible for the timing, nor does it require anyone to leave the 
firm.  Makes one question how much housecleaning they're really doing.
http://news.morningstar.com/articlenet/article.aspx?id=169527  As of June 
20, 2007, M* is also reporting that W&R is the only fund family not to even 
have an expected date for a settlement distribution plan proposal.
http://advisor.morningstar.com/articles/doc.asp?docId=13198

Mark Freeland
BnetOnewsX@sbcglobal.net