Compliance

The SEC, which increasingly is examining the securities trading practices of money managers, has sued an investment adviser for allegedly failing to get the best execution of trades for its clients.

Van Kampen Investment Advisory Corp. of Oakbrook, Ill. and former company chief investment officer Alan Sachtleben have agreed to pay $125,000 in fines for what the SEC said was misleading advertising about the performance of the Van Kampen Growth Fund. The SEC announced the settlement Sept. 8.

NASD Regulation has proposed a rule to bar broker/dealers from paying registered representatives more for selling proprietary mutual funds than for selling funds offered by outside fund companies. The practice of paying representatives more for selling house funds can create a conflict of interest between representatives and their clients, NASDR said in issuing the rule proposal Sept. 2. NASDR members have until Oct. 29 to comment on the proposal. In June, NASDR officials said they expected to issue such a proposal to ban extra pay for proprietary sales this summer. (MFMN, 7/12/99)

Complex derivatives are unnerving that part of the accounting industry that audits mutual funds.

Investors in the $40 million Navellier Aggressive Small Cap Equity Fund may not have to pay the costs of a lawsuit between the fund's adviser and two of its trustees.

The SEC has sanctioned a Phoenix firm that frustrated a handful of closed-end funds with its controversial tactics - known as mini-tender offers - to buy fund shares from individual investors.

The SEC is continuing to press the money management industry on year 2000, or Y2K, computer programming and compliance issues.

The newly adopted rules that govern the personal trading practices of portfolio managers contain few changes from the SEC's original proposal four years ago, regulators, mutual fund lawyers and consultants said last week.

Although Congress included much of what the mutual fund industry sought in a major tax cut bill - the Financial Freedom Act of 1999 - that legislation is likely to be vetoed by President Clinton next month.

Mutual fund companies and the SEC are watching developments at General American Life Insurance Company of St. Louis, Mo. A handful of fund companies, including OppenheimerFunds of New York, Federated Investors of Pittsburgh, Northern Trust Corp. of Chicago and Alliance Capital Management LP of New York, hold in their money market funds, short-term funding agreements issued by General American. The firm was placed under the supervision of Missouri insurance regulators Aug. 11. Representatives of the funds said they expect their investments will be repaid. "It's illiquidity, not insolvency," said J.T. Tuskan, a spokesperson for Federated. The SEC is monitoring the situation, a spokesperson said.

It could get a little easier for mutual fund companies to issue press releases next year.

Investment advisers who get caught trying to steer pension business their way by showering elected officials with campaign cash may be forced to work without fees under a new rule proposed by the SEC.

Mutual fund marketing and compliance executives seize on SEC regulators' every word, much as portfolio managers scrutinize even an offhand remark from Federal Reserve Chairman Alan Greenspan. So, a SEC compliance director's recent admonition about the allocation of initial public offering shares had mutual funds wondering if the SEC was planning to regulate this area.

Pilgrim Baxter & Associates didn't have to air any of its dirty laundry last week in Massachusetts Superior Court.

The mutual fund industry is now mulling the implications of the recent courtroom encounter between money manager Louis Navellier, of Navellier Investment Management of Reno, Nev., and three independent fund trustees.

Mutual fund attorneys are reviewing the risk disclosures in key SEC filings for the funds they advise because of what appears to be a unique case making its way through federal court in Nashville, Tenn.

It is unfortunate that the July 15 hearing in the case of Philip Goldstein v. Scudder New Europe Fund (MFMN, 7/26/99 ) remained mired in legal interpretations instead of delving into the real issue at hand. The presiding judge and attorneys focused on interpretations of SEC no-action letters. They never got into a debate on the pros and cons of imposing redemption fees on closed-end funds when they open. Industry observers argue both ways, and it is a debate worth having.

The Investment Company Institute of Washington, D.C., has suggested changes in an SEC rule proposal governing how mutual funds oversee their securities held in foreign countries. The ICI said it was troubled by language in the proposed amendment to rule 17f-5 of the Investment Company Act and a proposed new rule 17f-7. Together, the rule proposals, which require a fund's global custodian to monitor the risk of using sub-custodians in foreign countries under certain circumstances, could effectively prohibit funds from investing in some countries, the ICI said. The SEC should adopt language in the rule making it clear that funds could use a foreign sub-custodian, despite risks associated with the firm, the ICI said in a letter dated July 15 to the SEC.

NEW YORK - Scudder Kemper Investments of New York successfully thwarted an attempt by arbitrageur Phillip Goldstein to stop a shareholder vote that combined the issues of whether to open a fund and impose a redemption fee on those cashing out of the newly-opened fund.

A U.S. District Court jury in San Francisco found in favor of the three former independent mutual fund trustees being sued by Louis Navellier and his asset management firm, Navellier Investment Management of Reno, Nev.