Fred Alger Management, Inc. (Alger Management) and Fred Alger & Company, Incorporated (Alger Inc.) (collectively Alger) settled market timing and late trading charges brought by the SEC involving mutual funds in the Alger Fund Group (Alger Funds).
Alger Management, the investment adviser to the Alger Funds, and Alger Inc., a broker-dealer that serves as the principal underwriter and distributor of Alger Funds, permitted numerous select investors to market time the Alger Funds. This timing activity contradicted representations in the Alger Funds' prospectus that limited shareholders to six exchanges a year. Additionally, Alger Management failed to disclose that Alger Inc. had entered into numerous arrangements with select investors, including “sticky asset” arrangements, to permit them to time the Alger Funds. More specifically, from at least 2000 through late 2002, Alger Inc. permitted select investors to time the Alger Fund. Over time, Alger Inc. also began to demand that market timers place “static” or “buy and hold” investments in certain portfolios within the Alger Funds in exchange for timing capacity (these arrangements are sometimes referred to as “sticky asset” arrangements).