The SEC Wednesday announced that it had instituted settled enforcement proceedings against Bridgeway Capital Management and its president, John Noland Ryan Montgomery, in connection with more than $4.4 million in illegal performance-based fees that Bridgeway charged to three of its mutual funds. Bridgeway agreed to reimburse shareholders $4,407,700, plus prejudgment interest of $458,764 and pay penalties of $300,000. The SEC has also required the firm to hire experienced compliance personnel to ensure that Bridgeway applies its performance-based fee in accordance with the federal securities laws in the future.
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.