Compliance May 4, 2010

Michigan Investment Adviser Convicted of Embezzlement from Retirement Plan

Anthony A. James has been convicted of seven counts of mail fraud, six counts of wire fraud, and one count of embezzlement from an employee benefit plan.
Reported by

An announcement from the United States Attorney for the Eastern District of Michigan said the indictment charged that from 2001 through June 2009, James received more than $5,300,000 from more than 40 investors, most of whom resided in Illinois, Florida, and Michigan. Among the investors, were the owners and employees of Advocate in Manpower Management, Inc., of Boca Raton, Florida, who wired money to James for investment in the AIMM, Inc., Simple Individual Retirement Account Plan.  

According to the announcement, James represented to investors and pension plan participants that he would place their money in investments, including securities, bonds, and mutual funds for their benefit, but instead used the money for his own personal use, which included purchasing two residences, buying several cars, and paying his living expenses. He spent approximately $2,500,000 of victim investor money for his own personal use and approximately $2,800,000 of victim investor money to pay back other prior investors, a manner characteristic of a Ponzi scheme.

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Mail and wire fraud carry a maximum penalty of 20 years imprisonment and a $250,000 fine. Theft or embezzlement from an employee benefit plan carries a maximum penalty of five years imprisonment and a $250,000 fine. 

A sentencing date for James has been set for August 17.

The Markets May 4, 2010

2010 Fund Flows Could Go into Record Book

U.S. mutual fund investors have put nearly $200 billion into stock and bond mutual funds so far in 2010, according to Strategic Insight (SI), an Asset International company.
Reported by

An SI news release said that even if net inflows slow from this rapid pace, it is likely that full-year net inflows would top $450 billion, making 2010 a record for annual inflows into stock and bond funds.

The previous record for annual inflows into stock and bond funds was set last year, when just more than $400 billion went into long-term funds, according to Strategic Insight’s Simfund database. These figures include open- and closed-end mutual funds and funds underlying variable annuities, but exclude ETFs.

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The near-$200 billion that has flowed into stock and bond funds through April of 2010 was only the second time in the history of U.S. mutual funds that inflows during the first four months of the years reached about $200 billion; the previous time was the first four months of 2007, when net inflows to stock and bond funds totaled more than $210 billion.

“Lately we are observing the early signs of thawing of investors’ reluctance to get back on the stock market train. Assuming further economic and employment improvements in the coming months, more such investors should inch higher in their risk curve,” said Avi Nachmany, SI’s Director of Research, in the news release. “But turmoil in Europe and the fragility of the U.S. recovery are just a few of the many concerns still on investors’ minds.”

For all of 2010, Strategic Insight projects that U.S. stock and bond fund new sales are on track to rise 20% (or more) from their 2009 pace.

Worldwide, mutual fund investors have added nearly $1.4 trillion of net flows to bond and stock funds since March 2009’s bottom of the financial markets.

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