Reserve Management of New York, advisor to both The Reserve and the Hallmark Series of Funds, filed a preliminary proxy late last month that reveals a slew of problems that the firm is grappling with, some of which could raise regulatory ire and prove to be quite costly.

The firm's current challenges include multiple funds' advisory and sub-advisory management contracts and 12b-1 distribution fee agreements that were improperly authorized, internal control deficiencies, an auditor's resignation and a convertible securities fund that still has yet to file its June 2005 financial report and remains in limbo.

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