By Jonathan Stempel
(Reuters) - Federated Investors Inc (N:FII) will pay a $1.5 million fine to settle U.S. Securities and Exchange Commission charges that it failed to properly monitor whether outside consultants it employed might have misused potential market-moving information.
The SEC announced the civil settlement with Federated Global Investment Management Corp on Friday. It said Federated did not admit or deny wrongdoing in agreeing to pay the civil penalty.
The settlement resolves issues tied largely to a consultant who from 2001 to 2010 made biotechnology and pharmaceutical stock recommendations to the Federated Kaufmann Funds.
Meghan McAndrew, a Federated spokeswoman, said the company addressed the issues raised by the SEC prior to the regulator's inquiry. "There was no finding of any misuse of material nonpublic information," she added.
Federated, based in Pittsburgh, is one of the largest U.S. asset managers, with about $369.7 billion of assets under management as of March 31.
According to an order instituting settled administrative proceedings, Federated was unaware that the consultant in question had been a board member of four companies whose stocks Federated traded.
The SEC said the consultant at times also traded stocks that Federated owned in his own brokerage accounts, "sometimes in close proximity" to the funds' trades, and should have been subjected to "blackout periods" surrounding the funds' trades.
"FGIMC's written policies and procedures were not reasonably designed to prevent the misuse of material, nonpublic information with respect to outside consultants," the SEC said.
Federated ended its relationship with the consultant in May 2010, the SEC said.