The Pax World funds, which pioneered the concept of "socially responsible investing," has admitted that market timing occurred at one of its mutual funds, the Chicago Tribune reports.

In a recent letter to shareholders, CEO Laurence Shadek and President Thomas Grant said that a SEC review determined that Pax World failed to prevent some investors from engaging in market timing in its High-Yield Fund in 2003.

Grant told The Tribune that, unlike other market-timing cases, Pax World did not actively encourage market timing in return for significant, long-term investments from the market timers. He and Shadek both said in the letter that the activity did not burden investors with significant costs.

Still, the admission is a big blow for a company that prides itself on being an ethical fund.

The Pax World letter said "the difficulty in discovering and stopping this form of activity resulted from a combination of our outside vendors' systems limitations and a failure on our part to promptly recognize the significance of what was occurring." The company announced that it had taken several steps to prevent a recurrence.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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