The SEC is now targeting The Putnam Research Fund, Gartmore U.S. Growth Leaders fund and the WWW Internet Fund for potentially erring in performance-based fee calculations. The fees in question rise and fall in proportion to a funds ability to beat its benchmark, such as the Standard & Poors 500 Index.
Bridgeways recent $5.1 million settlement wit regulators opened the door for other firms that use performance-based fees to face scrutiny for questionable accounting practices, a new wrinkle to the mutual fund scandals, which have largely focused on improper trading.
The Putnam Research Fund revealed in a February regulatory filing that investigations had raised questions about its performance-based fee calculations. SEC regulators told Gartmore that its practice for determining performance-based fees could be out of compliance. Also, the WWW Internet Funds manager said the SEC believes shareholders may be entitled to a $500,000 rebate due to incorrect performance fee calculations.
Roughly 260 funds, including Fidelity Investments flagship Magellan fund, reap the benefits of performance-based fees in up markets. Fidelity has not been contacted in connection with the SECs recent spate of inquiries into performance-based fees, a spokesman said.