Principal Financial Group Inc., the biggest seller of 401(k) retirement plans, said Tuesday that more of its staff had improperly traded in their personal accounts, and that full restitution would be made to affected funds.
Last week, Principal confirmed it had settled a lawsuit with one former employee who it says improperly traded in his 401(k) account, and was "aggressively reviewing" activities of fund managers inside and outside the firm.
In Tuesday's regulatory filing, Principal said that an unspecified number of employees, including two portfolio managers, had "market timed" their personal accounts several years ago.
Market timing -- short-term trading of mutual funds to profit from "stale," or hours-old, prices -- is not illegal but is discouraged because it harms returns for long term shareholders. It is at the heart of ongoing scandals that have rocked the $7 trillion mutual fund industry.
Principal said in its regulatory filing that gains made by staff who market timed 401(k) accounts and mutual funds, mostly between 1998 and 2000, totaled almost $180,000 and that "the majority" of the employees involved were no longer with the company.
Des Moines, Iowa-based Principal said restitution would be made to all funds affected and that no market timing had been done by portfolio managers since 2000.
Principal said in the future it would use an additional valuation service for global equities to "further reduce the arbitrage opportunity for market timers."
J. Barry Griswell, chairman, president and chief executive of Principal Financial Group, said: "We take our responsibility for investment stewardship extremely seriously.
"We do not permit or condone any behavior that is in any way inconsistent with that responsibility."
Principal said in the filing it had not permitted "late trading" of funds, which is illegal and involves shares being bought after the market close at the same day's price instead of the next day's.
Principal said further it had "not entered into any special arrangements to permit select investors to engage in market timing" or given any investors information "not generally available to the investing public."
The company also said it would increase redemption fees, which discourages market timing, "as needed".