Dreyfus Corp. agreed May 10 to pay nearly $2.7 million to settle charges related to how it allocated and disclosed its practices on initial public offerings for the Dreyfus Aggressive Growth Fund.
Dreyfus neither admitted nor denied wrongdoing in its handling of this fund or of promotional ads for the fund. Dreyfus, however, agreed to pay a $950,000 civil penalty to the Securities and Exchange Commission, while the former portfolio manager of the fund agreed to pay the SEC a $50,000 fine. In addition, Dreyfus will contribute $1.6 million to the State University of New York to further investor education and awareness.
Dreyfus also agreed to cease and desist violating provisions of the federal securities laws, the SEC said.
The SEC charged that shortly after the inception of the Dreyfus Aggressive Growth Fund on Sept. 29, 1995, when the fund opened with only $2 million in assets under management, fund portfolio manager Michael Schonberg invested in a disproportionate share of "hot" IPOs. This boosted the fund's 1996 first-year returns to 81.92 percent and attracted $152 million in additional assets within eight months of the fund's launch, the SEC charged.
"In addition, Dreyfus's advertisements failed to draw attention to the extraordinary performance of the Dreyfus Aggressive Growth Fund, the role that IPOs had played in this, or to disclose that this level of performance was not sustainable," said Richard Sauer, an assistant director in the division of enforcement at the SEC.