Regulation

The Securities and Exchange Commission has issued an adopting release that formalizes an amendment to Rule 12b-1 that prohibits funds from selecting broker/dealers for portfolio transactions based upon their sales of mutual funds. Fund companies must comply with the order by Dec. 13. Funds are not banned outright from choosing a broker/dealer that sells its funds to execute portfolio trades. Instead, the SEC requires that funds ensure selling agreements do not influence that decision.

Three firms affiliated with PIMCO equity funds agreed to pay $50 million to settle fraud charges related to a market-timing scheme that bilked long-term shareholders.

Charles Schwab & Co. agreed last Tuesday to pay $350,000 to settle charges that it improperly permitted investment advisor customers to alter mutual fund orders after the closing bell.

NEW YORK -- Using 12b-1 fees to pay brokers for selling mutual funds has morphed the fund business into a massive marketing machine, a development that has sparked controversy over the best way for fund companies to finance distribution.

The Securities and Exchange Commission said it would forge ahead with a new rule effective January 2006 requiring 75% of mutual fund boards to be comprised of independent directors and overseen by an independent chairman. The U.S. Chamber of Commerce sued the SEC on Sept. 2, charging that it had overstepped its rulemaking authority.

Amvescap, the London-based parent of Invesco Funds and AIM Advisors, said last week it has agreed to a $451 million settlement with several regulators, including $75 million in reduced fees, to resolve charges of improper trading activity by the sister shops.

What a difference a year makes.

Three former Invesco executives agreed to pay a combined $340,000 in fines to settle enforcement actions for their role in a market-timing scheme that allowed preferred clients to make excessive trades in exchange for sticky assets.

The long-awaited and much maligned deadline for mutual funds to disclose how they vote their proxies came and went last week as investors for the first time were given a peek at decisions on such matters as executive compensation and boardroom elections.

The Securities and Exchange Commission filed civil charges against broker/dealer National Clearing Corp. (NCC) and its parent company, JB Oxford Holdings (JBOH), for allowing customers to engage in late trading and improper market-timing activities. According to the SEC complaint filed in the U.S. District Court of Los Angeles, each of the defendants facilitated thousands of market-timing and late trades in more than 600 mutual funds between June 2002 and Sept. 2003.