Strong Mutual Funds said its board chairman, Richard S. Strong, has resigned amid an inquiry into his personal trading of the company’s funds.
The decision does not affect Strong’s role as chairman and CEO of Strong Capital Management, the adviser to the Strong Mutual Funds, the funds’ independent directors said in a news release Sunday.
On Thursday, Strong acknowledged trading in some of the firm’s funds and said he would reimburse investors for any losses they may have sustained because of his trades. He also said he would be prepared to resign.
Richard Strong is under investigation by three agencies for alleged improper trading that officials say may have benefited him and his friends and family.
Investigators are focusing on market-timing transactions, in which short-term, in-and-out trades are used to take advantage of market-moving news. The process is not illegal, but many fund companies — including Strong — have policies against it because it increases costs and hurts long-term shareholders. Regulators have indicated it is fraudulent for a fund to allow selective market-timing without disclosing that to shareholders.
Last week, the company confirmed that Strong invested assets of certain trusts and other accounts in funds managed by his company, with himself and friends and relatives as beneficiaries, and over the years a small number were next-day transactions.
The company said Strong is providing information on his trades to the New York Attorney General’s Office, the Wisconsin Department of Financial Institutions and the Securities and Exchange Commission.
Richard Strong did not immediately return a telephone message at his home Sunday.
The release said directors are continuing to investigate the trading activities and working to protect shareholders’ interests.
Strong, based in Menomonee Falls, Wis., manages about $42 billion in assets.