Richard Strong

Richard Strong - CEO Under Fire: Richard Strong, CEO and founder of the Strong Financial Corporation and Strong Funds, is under investigation for market timing his own funds for personal gain.

Who is Richard Strong?: Richard Strong received a BA from Baldwin-Wallace College and an MBA from Baldwin-Wallace College. Mr. Strong founded Strong Financial Corporation in 1974. The firm is headquartered in Menomonee Falls, Wisconsin and manages $42 billion ($1 billion in college savings plans). Richard is listed on the Forbes 400 as being worth $800 million and married with one child. He is now 61 years old. He already resigned from the mutual fund board, but remains the chief executive of Strong Capital Management.

Case Against Richard Strong: Investigators say that he engaged in improper, short-term trading of his firm's mutual funds, netting at least $600,000 in profits for himself and others over several years. The actual amount was probably higher, but shrunk during the bear market.

How Investigators Discovered: Investigators were tipped off when officials at Strong disclosed trading information after receiving a subpoena New York State Attorney General Eliot Spitzer's office. Spitzer first started investigating Strong funds after learning that Canary Capital Partners used strong funds for market timing. Strong funds have a 1% penalty for fund purchases that were held less than one year and trades within 30 days would result in blacklisting, but Canary Capital and Richard Strong got around these rules.

Richard Strong's Timing Strategy: It's believed that Richard Strong starting trading his own funds five years ago and made about two dozen trades a year (most in and out trades only spanning a couple days). It appears that his strategy involved buying fund shares when the market would rise, betting that the values of the small-cap and midcap stocks in those portfolios would take a few days to catch up with the rest of the market, then gradually sell the shares. Investigators did not mention any late trading (after market close).