Compliance

Dreyfus Corp. agreed May 10 to pay nearly $2.7 million to settle charges related to how it allocated and disclosed its practices on initial public offerings for the Dreyfus Aggressive Growth Fund.

A former SEC lawyer and the Consumer Federation of America are employing a little-used tactic that could compel disclosures by fund companies unheard of in recent years, according to fund industry lawyers.

The SEC is considering changes in a proposal - strongly opposed by some fund companies - designed to stop firms from contributing to government officials in an effort to win business managing government employee pension plans.

Two mutual fund shareholders are challenging the constitutionality of a two-month-old Maryland law designed to define what makes a mutual fund director independent.

The SEC's office of compliance, inspections and examinations, in a letter May 1 to investment advisers, has identified 12 areas of potentially troubling practices that the SEC expects to review during exams. The letter, which largely tracks speeches top compliance office officials have made this year, outlines advisers' duties regarding advertising, personal trading, soft dollar disclosure and other issues. It also offers examples of instances of violations the office has found.

The Canadian fund industry is lobbying against new securities regulations that require mutual fund prospectuses to compare past performance to market benchmarks. The mandatory references to market indexes are among the more controversial aspects of the legislation, National Instrument 81-101. The sweeping new rule took effect on Feb. 1 and is coming into force gradually this year as fund companies revise their prospectuses and introduce new funds.

Mutual funds and custodians have until next year to comply with new federal securities rules designed to insure that fund securities held abroad are properly safeguarded.

The adviser to the Monetta Family of Mutual Funds and the company's top executive will appeal a recent Securities and Exchange Commission ruling that the firm and executives associated with the funds committed fraud.

At an upcoming roundtable on investment advisors May 23, the Securities and Exchange Commission will explore whether investment advisors should form a self-regulatory organization in the manner of the National Association of Securities Dealers, among other issues.

The SEC appears to have succeeded with its appeals to the mutual fund industry to limit redemption fees to two percent.

A written agreement that established specific guidelines on how a market timer could time investments in AIM Asset Management's funds is the subject of a lawsuit filed by the market timer against AIM's transfer agent.

BOSTON - A form of mutual fund style drift is now being examined by the Securities and Exchange Commission in its review of mutual funds and their performance advertising practices.

A hearing held May 1 on a request by Scudder Kemper Investments of Boston for a preliminary injunction against Robert Hoffman, Scudder's former managing director, gave no clues as to the possible outcome of pending arbitration between the two parties, according to an industry lawyer.

The SEC is looking into how fund companies process money earmarked for closed funds, said Cindy Fornelli, an advisor to Paul Roye, director of the SEC's division of investment management.

A hearing on a request by Scudder Kemper Investments of Boston for a preliminary injunction against Robert Hoffman, Scudder's former managing director, is scheduled for May 1. A hearing was scheduled after Scudder filed a complaint in U.S. District Court April 17 alleging Hoffman is violating terms of a separation agreement he signed with the firm. If issued, the injunction would prohibit Hoffman from hiring Scudder-Kemper employees or soliciting any of its clients. A temporary restraining order to prevent Hoffman from hiring Scudder employees was issued when the complaint was filed.

Mutual fund companies and registered investment advisors need to do more to monitor the accuracy of the information on their websites, according to a top SEC official.

The SEC wants to extend its campaign to eliminate legal-speak in mutual fund prospectuses to documents fund advisers file disclosing key fund information. Extending what is called "plain English" to these documents, known as Form ADVs, is likely to generate more work for lawyers and consultants and add what should be a one-time expense for fund advisers.

Regulators are continuing to warn fund companies about how they advertise their funds' performances.

It has not taken the SEC long to make sure the mutual fund industry is following the practices outlined in a letter the agency issued in December.

The Securities and Exchange Commission March 28 charged Monetta Financial Services of Wheaton, Ill. with failure to disclose initial public offering holdings in two of its funds in their quarterly statements.