Four Fund Firms Pay $1.7M for Disclosure Failures

The Securities and Exchange Commission has fined four fund companies—AllianceBernstein, Putnam Investment Management, Smith Barney Fund Management and Salomon Brothers Asset Management—$1.7 million for failing to disclose to investors in closed-end funds that distributions it paid to them between 2001 and 2004 came either entirely or partly from shareholder capital or capital gains. Alliance, Smith Barney and Salomon are each paying a fine of $450,000, and Putnam is paying $350,000. The four firms settled with the SEC without admitting or denying the charges.

The SEC said that Alliance made 22 such distributions between 2002 and 2004 for two close-end funds, The Spain Fund and Alliance All-Market Advantage Fund, and Putnam made 42 such distributions in four-closed funds between 2000 and 2002, the Putnam Master Intermediate Income Trust, Putnam Premier Income Trust, Putnam Master Income Trust and Putnam Managed High Yield Trust.

The SEC said that Smith Barney made 89 of these improper distributions between 2001 and 2004 from three closed-end funds, the High Income Opportunity Fund, Zenix Income Fund and Managed High Income Portfolio. The Commission said that Salomon made 47 such distributions between 2001 and 2003 for two closed-end funds, the Salomon Brothers High Income Fund and the Salomon Brothers High Income Fund II.

In addition, the SEC said that Smith Barney and Salomon issued annual reports for some of their closed-end funds that inflated annual dividends and yields by including shareholder capital in them, without informing investors.