Deals & People August 7, 2009

Legg Mason Shifts Funds, Announces Manager Retirements

Legg Mason Inc. reorganized five funds in its ClearBridge Advisors unit as money manager Alan Blake and Hersh Cohen, the division’s investment chief, are set to retire.

Reported by

Maria Rosati, a spokeswoman for the Baltimore-based company, told Bloomberg that Cohen will end his tenure as manager of the Legg Mason Partners Appreciation Fund as he prepares for his eventual retirement. Blake, manager of the $2 billion Legg Mason Partners Large Cap Growth Fund, will retire in October.

The company disclosed the changes in filings today with the U.S. Securities and Exchange Commission, according to Bloomberg.

Legg Mason Partners Appreciation will be managed by Scott Glasser and Michael Kagan. Glasser and Peter Bourbeau will replace Blake on Large Cap Growth.

Glasser will relinquish his roles of manager of the $1.7 billion Legg Mason Partners Dividend Strategy Fund and co-director of research.

The $33.8 million Legg Mason Partners Equity Income Builder will be merged into the larger $1.7 billion Capital and Income Fund. As part of that combination, manager Robert Gendelman will leave the firm, Rosati said, according to Bloomberg.

Cohen will manage Capital and Income with Peter Vanderlee and Mike Clarfeld.

Compliance August 7, 2009

MSSB Bans Leveraged ETF Sales

Morgan Stanley Smith Barney (MSSB) became the latest wirehouse to put its foot down on exchange-traded funds (ETFs).

Reported by

The firm announced today that it is banning solicited purchases of leveraged, inverse, and leveraged inverse ETFs in traditional brokerage accounts. Unsolicited purchases will be permitted but subject to enhanced oversight and review. Additionally, no purchases of these securities will be permitted in advisory accounts managed by MSSB financial advisers.

Furthermore, MSSB said it has encouraged advisers to review existing position in the ETFs “to emphasize their unique characteristics and risks.”

The Financial Industry Regulatory Authority (FINRA) has warned about the products. In Regulatory Notice 09-31 it notes that leveraged ETFs “typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets.” It also reminds firms of their obligations that recommendations to customers be suitable.

UBS announced last week that it had stopped selling ETFs that use leverage, saying they detract from long-term investing, Reuters reported. Edward Jones also recently banned the sale (see “Edward Jones Puts Brakes on Leveraged ETFs”).
 

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