Compliance

Insurance companies have increasingly been seeking exemptions under Section 26(b) of the Investment Company Act to substitute one annuity sub-account for another without holding a shareholder vote, raising SEC concerns.

The U.S. District Court for the Southern District of New York has tossed out a motion by Vanguard of Malvern, Pa. to dismiss a lawsuit that Standard & Poor's parent company, McGraw-Hill of New York, brought against Vanguard for using the S&P 500 Index for an exchange-traded class of shares.

Northwestern Mutual Life Insurance Company of Milwaukee, Wis. has been given permission by the Treasury Department's Office of Thrift Supervision to establish a trust company that will offer trust services and investment management services to wealthy clients, the company announced.

The fair disclosure regulation that the SEC approved Aug. 10 is causing widespread concern among mutual fund portfolio managers and analysts that it will stop the flow of corporate information needed to effectively run funds, executives said.

Franklin Templeton Services, Inc., a unit of Franklin Resources of San Mateo, Calif., has sued its previous president for allegedly breaching his $1.17 million severance agreement.

The Securities and Exchange Commission has granted its first no-action letter easing the personal holdings requirements for independent directors of a fund's investment advisor. The decision puts the SEC's treatment of independent directors of a fund's investment advisor on more equal footing with the independent directors of a mutual fund company.

Shareholders of Phoenix Investment Partners of Hartford, Conn. have filed a class-action lawsuit against Phoenix Home Life Mutual Insurance Company, charging its offer to buy out the firm is far undervalued.

In a rare but not unprecedented occurrence, the shareholders of a small fund are being asked to renew the fund's investment advisory contract, so that the advisor can be paid for the first time in nearly a year.

Transamerica Life Insurance Company of Canada fired three employees and suspended 17 in a trading scandal involving one of the firm's offshore funds based in Luxembourg, said Barry Francis, a spokesperson for the company.

The Investment Company Institute of Washington D.C., filed a motion July 28 to dismiss a complaint against it alleging the industry association has violated federal securities laws by aligning too closely with fund advisers, according to the motion.

The Securities and Exchange Commission has speedily adopted a rule to permit fund companies to continue to convey sales and marketing materials electronically - particularly on websites - to prospective investors without first supplying them with a prospectus or asking for their permission to provide the prospectus in electronic form.

The Orbitex Focus 30 Fund is hoping to file a countersuit against an individual who named the fund in an amended lawsuit filed earlier this year. A motion was filed July 13 in the 13th Circuit Court in Hillsborough County, Fla., seeking the court's approval to file the countersuit.

The U.S. Second Circuit Court of Appeals of New York ruled July 10 that broker-dealers do not have to disclose trailing payments received from fund firms. The court ruled that such fees are already disclosed in funds' prospectuses and statements of additional information.

Washington - Proposed Securities and Exchange Commission rules prohibiting independent auditors from providing other types of consulting services to their audit clients should be adopted, two mutual fund industry executives told the SEC last week.

The National Association of Securities Dealers Regulation posted guidance on its website July 21 about mutual fund and annuity advertising and suitability screening for multi-class mutual funds.

The Investment Company Institute of Washington D.C. has until July 31 to respond to a lawsuit filed by two shareholders alleging the organization is in violation of federal security laws, according to Ronald Rubin who is representing one of the shareholders. The ICI is expected to file a motion seeking a dismissal of the suit, said Rubin.

If legislation introduced in the House of Representatives late last month becomes law, it would make it easier for fund companies to capture a greater percentage of the nearly $300 billion annual rollover of 401(k) assets, according to industry executives and analysts.

The General Accounting Office's report on fund profitability, which draws no conclusion as to whether fund companies have taken advantage of economies of scale to reduce fees but does encourage more disclosure of fees, has elicited a range of responses. It has been dismissed by some industry analysts as a self-serving move by politicians and welcomed by consumer advocates.

The Rupay-Barrington Financial Group of Arlington, Tex. issued a statement July 17 denying knowledge of a lawsuit the SEC filed against the firm accusing it of fraud. The SEC's charges were posted on its website July 12, and accuse the company of making improper loans to its affiliates resulting in inflated net asset values of its three funds. It also charges the companies with illegally suspending investor's redemptions, according to the SEC filing.

The Investment Company Institute has asked the SEC to make changes in its after-tax rule proposal that would reduce the quantity of data funds would be required to disclose and would mean funds have to include the data in prospectuses only, not in annual reports as well.