In a rather unusual case, the Securities and Exchange Commission sanctioned Kelmoore Investment Co. of Palo Alto, Calif., and fined the company $100,000 for misleading disclosures regarding the investment advisory fees it charged on five proprietary mutual funds, two of which were only available within variable annuity contracts and were liquidated at the end of 2005 due to low asset levels.

The SEC charged that from 1999 to 2005, Kelmoore understated the total fees it charged investors for managing the mutual funds. Although the funds' prospectuses showed an annual advisory fee of 1%, the fund adviser also received substantial brokerage commissions for executing options contract transactions that are a mainstay of the funds' investment strategy.

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