The Securities and Exchange Commission March 28 charged Monetta Financial Services of Wheaton, Ill. with failure to disclose initial public offering holdings in two of its funds in their quarterly statements.
The SEC ruled that Monetta Financial Services' Monetta Fund and Monetta Trust committed fraud by not revealing the IPO holdings in the quarterly reports. Chief Administrative Law Judge Brenda P. Murray fined the firm a civil penalty of $200,000. The investment adviser and two funds have 21 days to file for SEC review of the judge's decision.
Robert S. Barcarella, president of Monetta Financial Services, said he was surprised and disappointed by the court's decision since the IPOs in question resulted in only $39,000 in realized profits. This represented a miniscule portion of the holdings in the two funds in February through November, 1993 when the Monetta Fund had $550 million and the Monetta Trust had $50 million in assets under management, Barcarella said.
"This will be a landmark case; the SEC regulates through enforcement," said Barcarella. "I don't know anyone in the fund industry who would not comply with an SEC rule and regulation," but the SEC currently does not have any IPO disclosure regulations, he said.