Richard Strong stepped down on Tuesday as chairman and chief executive of Strong Financial Corp., parent of the namesake asset management company he founded 29 years ago, in a move many said is designed to help the company survive an industrywide probe of mutual funds.  

A majority owner, Strong will take steps to divest himself of voting control of Strong Financial, the company said.

The Strong family of mutual funds was named in the initial probe unveiled in September by New York Attorney General Eliot Spitzer that outlined widespread trading abuses in the $7 trillion industry.

Industry critics said Strong, a North Dakota native who had long hoped to make the Wisconsin company a powerhouse in asset management, had no choice but to resign. He has been listed by Forbes magazine as one of the 400 richest Americans.

"This is the only chance that the company has to rebuild and survive," said Roy Weitz, who runs mutual fund watchdog FundAlarm.com. "In that respect, I think it is a good move. It is probably a month too late, but better late than never."

Shareholder rights advocate Mercer Bullard said: "He had no choice, because any injunction or conviction would have barred him from the fund industry."

The investigation led Matrix Asset Advisors Inc. to put on hold plans to sell its top-performing fund, Matrix Advisors Value Fund, to Strong, and many investors pulled money from the company. Strong now manages just over $40 billion; $933 million left Strong in September and October, the company said.

"This is probably a prelude to some additional charges coming down (most likely against Strong himself) from Spitzer or the SEC," said Paul Herbert, who covers Strong for mutual fund research company Morningstar Inc.

If the company were to be sold, Herbert said it would most likely be to a big bank.

In early November, Strong stepped down as director of the company's mutual funds board after the New York attorney general's office said he had made as much as $600,000 over five years in improper trading.

Kenneth Wessels, a former senior executive of Dain Rauscher Corp., which has since been acquired by Royal Bank of Canada, will replace Strong as chairman and CEO, the company said. Wessels is also a former chairman of the National Association of Securities Dealers board of governors.

A spokeswoman said neither Strong nor Wessels would comment.

FAST MONEY

Strong was involved in market timing, which is quick trading designed to exploit arbitrage opportunities in the way mutual funds are priced, Spitzer's office had said. Other Strong investors were discouraged from making similar trades.

The U.S. Securities and Exchange Commission also had launched a similar investigation.

Strong had tried to deflect criticism by offering to reimburse Strong-advised funds for any financial losses investors 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.

Strong also stepped down as chief investment officer and as director of the company's board, effective immediately, the company said in a statement.

Richard Weiss, a 12-year Strong employee, will lead the company's investment department, the company said. Weiss is responsible for Strong's two biggest equity funds, and owns an equity stake in the company, Morningstar's Herbert said.

"I suppose the more outsiders, the better, in a situation like this," Herbert said, when asked about Weiss. "He was apparently not involved in market timing, but this is the kind of situation where you don't know who may have been involved."

Wessels, Weiss and Frank Doyle, who previously was a consultant to Strong, will form the company's new board of directors. A search is under way to expand the board's size, the company said.

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