The independent directors of the Yacktman funds have asked the SEC to intervene in their fight with Donald Yacktman. The directors contend that Yacktman and his money management firm have made "thinly veiled threats" to try to control the independent directors. In addition, the directors allege that employees at Yacktman's firm have engaged in improper practices, including unspecified violations of the funds' code of ethics.

The directors -- Jon D. Carlson, Stanislaw Maliszewski, Thomas R. Hanson and Stephen E. Upton -- asked SEC Chairman Arthur Levitt in a letter dated Sept. 25 to take whatever steps necessary to prevent the alleged coercion of the directors "from exerting an undue chilling effect over not only the (Yacktman funds' independent directors), but (independent) directors to investment companies throughout the industry."

Yacktman denied the allegations and questioned their timing. An SEC spokesman declined to comment. Yacktman Asset Management is mounting a proxy campaign seeking to have shareholders fire the independent directors. Yacktman contends that the directors have exceeded their legal authority by becoming too involved with the investment process.

In their letter to Levitt, the Yacktman independent directors enclosed a Sept. 15 letter which Yacktman had sent them. In the letter, Yacktman said his firm was prepared to "spend whatever it takes" to win the proxy fight and urged the directors to resign. He said any move by the directors to use fund assets to pay to oppose Yacktman's campaign would violate the Investment Company Act, the federal law which governs mutual funds.

The independent directors said that Yacktman's letter was tantamount to a threat of "personal financial ruin" if they did not resign. They argued that Yacktman's proxy statement also contained "false and misleading" statements. The SEC staff must approve the language in the proxy statement before it is sent to shareholders.

The directors said their challenge arose in the past year as they began to question the "depth and experience" of Yacktman Asset Management personnel, the investment techniques the firm uses and whether those identified in the funds' prospectuses were actually managing the funds.

In denying the allegations, Yacktman said the funds are audited by outside, independent accountants and that they are subject to SEC audit. The funds' administrative operations also are done by an outside vendor, Yacktman said.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.