Funds scandal touches college plan
The mutual funds scandal came home last month for investors in Nevada’s college savings plan, but most investors barely noticed.
Funds invested in Strong Mutual Funds, one of the funds under scrutiny for irregular trading practices, quietly were rolled out of the state’s college savings plan into other mutual funds.
At their peak, Strong Mutual Funds had garnered about $85 million of the $500 million invested in the College Savings Plans of Nevada.
A college savings plan often known as a “529 Plan” allows parents to save money for their children’s education in accounts that grow tax-free.
Although Nevada’s college savings plan is overseen by the state government, parents anywhere in the United States can invest in Nevada’s plan.
State Treasurer Brian Krolicki emphasized that neither Strong Mutual Funds nor Richard Strong, the company’s chairman, chief executive and chief investment officer, face criminal charges.
But Krolicki said Nevada officials were concerned about the cloud that hung over the funds after allegations in September by Eliot Spitzer, New York’s attorney general, that Strong and his firm engaged in questionable trading.
“It’s all about the investors,” Krolicki said.
The state board that oversees the college savings plan worried that investors could be left holding the bag if the price of Strong shares should collapse in an ongoing investigation.
The trustees of the College Savings Plans of Nevada put together a proposal to transfer investments out of Strong Mutual Funds into other mutual funds that are part of the state plan.
The transfers occurred in mid- December.
Krolicki said investors accepted the shift quietly.
He said the state doesn’t appear to have any financial exposure from its association with Strong Mutual Funds.
Before the transfers were made, the state treasurer said officials required each of the mutual funds into which money would be transfer to pledge that they hadn’t been involved in questionable trading practices.
Krolicki said officials of Strong Mutual Funds were cooperative and assisted in making the transfers go smoothly.
The treasurer noted that Nevada, which offers a diverse group of college savings plans through a variety of program managers, was in relatively good shape as it dealt with Strong Mutual Funds.
Some other states, such as Wisconsin where Strong is based, affiliated themselves exclusively with a single mutual fund distributor, leaving them few options.
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