Special Program Root Tag

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.

Janus Capital revealed that its assets under management dropped 0.9% in August to $127.8 billion from $129 billion at the end of July. The Denver-based shop has been bleeding assets at an alarming rate after its tech-heavy growth funds collapsed with the bear market and the firm was slapped with a hefty lawsuit over trading abuses.

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.

Evergreen Investments, the asset management division of Wachovia Bank, plans to start using the the mWholesaler wireless interface from Pyxis Software to give sales managers instant access to critical customer relationship management information. mWholesaler hooks up with a BlackBerry to give remote access to sales, CRM and enterprise data that will help Evergreen managers increase sales, according to the company.

Traditional mergers and acquisitions among asset management companies may be a bit passe these days. Affiliated marketing partnerships, revenue and equity sharing deals and sub-advisory adoptions are definitely in vogue, right alongside the more conventional outright company buyouts.

Putnam's Shadek to Lead New Small-Cap Division

Charles Schwab Corp. said on Thursday that daily average trades on its Mutual Fund OneSource service and other asset-based trades jumped 10% in August from the year-ago period, but fell 4% from July. They averaged 60,100 trades from that group, according to the firm.

Pioneer Investments announced its entry into the separately managed accounts business Wednesday by signing a deal to purchase a minority ownership stake in Oak Ridge Investments, LLC.

Amvescap, the parent of AIM Advisors and Invesco Funds, has been the subject of takeover speculation, which has helped its shares in recent London trading, according to several European publications. Some predict Amvescap will be bought out by a U.S. bank.

The The California Department of Corporations, a business arm of California’s state government, this week joined throng of powerful consumer advocates now lashing out at mutual fund companies for charging investors excessive marketing fees.

Wells Capital Management announced plans this week to preserve the majority of senior portfolio managers and mutual funds at its newly acquired Strong Capital Management subsidiary but some niche sector investments may soon disappear, the Milwaukee Journal Sentinel reports

Investment Company Institute President Paul Schott Stevens said in Boston this week that hedge funds should be more harshly investigated by the Securities and Exchange Commission, CBS MarketWatch reports.

The State of California’s Business, Transportation and Housing Agency’s Department of Corporations has shut down a bait-and-switch scheme designed to sell fixed annuities to seniors. The department filed a desist and refrain order on July 29, barring the companies and salespeople involved from continuing to lure seniors with the offer of fraudulently high certificate of deposit (CD) rates.

The SEC and California Attorney General Bill Lockyer have fined two PIMCO investment advisors and its distributor a total of $20.6 million for failing to disclose how they directed trades to 50 broker/dealers between 2000 and 2003 to defray shelf space costs. The funds in question were the PIMCO Multi-Manager Series funds. The SEC fined the three entities $11.6 million, while the California Attorney General fined the distributor $9 million.

The SEC Wednesday announced that it had instituted settled enforcement proceedings against Bridgeway Capital Management and its president, John Noland Ryan Montgomery, in connection with more than $4.4 million in illegal performance-based fees that Bridgeway charged to three of its mutual funds. Bridgeway agreed to reimburse shareholders $4,407,700, plus prejudgment interest of $458,764 and pay penalties of $300,000. The SEC has also required the firm to hire experienced compliance personnel to ensure that Bridgeway applies its performance-based fee in accordance with the federal securities laws in the future.

Fidelity Investments has introduced two new mutual funds that will help investors delve into two separate sectors of the market – international real estate, and high-income bonds. With the launch of the Fidelity International Real Estate Fund and the Fidelity Focused High Income Fund, the company said it wanted to give its investors more options when they want to diversify their portfolios.

Once again, Jack Bogle, the disenfranchised founder of The Vanguard Group, is using his bully pulpit to slam the industry practice of collecting excessive 12b-1 marketing fees, TheStreet.com reports.