Richard Strong yesterday resigned as chairman of Strong Mutual Funds, a few days after New York attorney general Elliot Spitzer threatened to charge him with improper trading. Strong will retain day-to-day control over its parent company, Strong Capital Management, as its chairman and chief executive.
Strong Capital Management, which manages $42.7 billion in assets, was one of four companies named when Spitzer announced his investigation into mutual fund trading in September. Spitzer has claimed that Strong and others close to him made as much as $600,000 over five years via in-and-out trades in the firm’s funds designed to exploit arbitrage opportunities in the way funds are priced.
The U.S. Securities and Exchange Commission has launched a similar investigation into such practices, and on Friday three states with college savings plans managed by Strong Capital said they would convene emergency meetings to discuss the charges against the privately held company. Richard Strong has indicated he would be prepared to quit the firm if necessary and offered to reimburse fund-holders for any financial losses suffered due to his transactions. Strong, who founded the investment company in 1974, has said he does not believe his transactions were disruptive to the company’s mutual funds.