Pax World Management Corporation has settled charges by the Securities and Exchange Commission that two of its funds, Pax World Growth and Pax World High Yield, purchased securities that violated their fund policies.
These two funds bought shares of companies linked with gambling and alcohol products, contrary to the funds objectives. Pax World was ordered to pay $500,000 in penalties and agreed to a cease-and desist order.
Pax World bought shares from the manufactures of alcohol and gambling products, deriving over 5% of revenue from contracts with the Department of Defense, and additionally failed to meet the funds environmental and labor standards. Pax had at least one security between 2001 and 2006 that violated their socially responsible restrictions.
Additionally, Pax World failed to follow procedures of screening all securities through the social research departments prior to purchase and did not screen 8% of the securities purchased between 2001 and 2005.
In 2005, Pax assumed additional efforts to obey its restrictions, replacing the portfolio mangers of the High Yield and Growth funds, the senior management, the director of social research, the chief compliance officer, and the president and chief executive.
The new president and chief executive, Joseph Keefe, reorganized the business operations, repaired management and established compliance functions with new policies, controls and procedures.
We regret and take full responsibility for what occurred during the 2001-2005 time period, Keefe said. We are confident that the steps we have taken to upgrade Pax World management, personnel and compliance controls will help us assure that mistakes of this nature are not made in the future.