Richard Garland, ceo of Janus Capital Group's international business, has resigned amid allegations that he condoned a short-term trading agreement with hedge fund Canary Capital Partners LLC to conduct short-term trades in some Janus international funds. Garland is the first Janus executive to lose his job in the ongoing investigation of the company's mutual fund practices.

Erich Gerth, vice president of Janus Global Adviser, who has been promoted to senior vice president and managing director of Janus Global Adviser, replacing Garland. He will assume responsibility for Janus's world-wide broker-dealer and independent adviser sales units. Gerth has only been with the company for a little over four months---he joined the company in July from Goldman Sachs Asset Management.

Speculation began to mount around Garland after emails that seemed to promote a short-term agreement with Canary were featured in the complaint against the hedge fund filed by New York State Attorney General Eliot Spitzer on September 3.

In an SEC filing today detailing an internal investigation into short-term trading and market- timing at the firm, Janus said that some of its employees thought "limited, controlled market timing" wasn't harmful to investors. Several of these employees have left the firm.

However, the firm said it doesn't believe that any of its porfolio managers or senior executives engaged in frequent trading through personal accounts. It also said Janus has no agreements allowing investors or clients to buy fund shares after market close and obtain that day's closing price and that no evidence has been found that any investor or client placed late-day trades directly with Janus.

In the meantime, Janus has hired Marianne Smythe, a partner at the law firm of Wilmer Cutler & Pickering and a former director of the SEC's Division of Investment Management, to review Janus policies.  

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