The SEC Wednesday announced that it had instituted settled enforcement proceedings against
According to the case, between July 1995 and this past March, Bridgeway charged investors fees based on the funds present value, rather than their trailing five-year average. Because funds current assets typically exceed a trailing period, this was an inappropriate manner in which to calculate performance fees, the SEC said.
"Mutual fund managers must ensure that advisory fees are assessed in strict accordance with the law," said Harold F. Degenhardt, administrator of the SECs Fort Worth, Texas, office. "This is particularly true with respect to performance-based fees, which must be a fair reflection of a funds performance during the entire performance period."
Bridgeway and Montgomery neither admitted nor denied the findings in the Commission's Order. In fact, Montgomery has recently come to the fore in cries for mutual fund reform and even received pats on the back from Morningstar for how "investor-friendly" his funds were. His funds have always been known as some of the most transparent on the market, and his company donates half of its profits to charity.
Although the fund industry scandal has dragged on for a while, Montgomerys is the first case involving fees, which have become a hot issue.
