Compliance

BOSTON - Harold Baxter and James D. McCall surely would have preferred to spend the Friday afternoon before Memorial Day weekend just about anywhere else. Baxter, CEO of Pilgrim Baxter & Associates of Wayne, Pa., and McCall, up until that day one of Pilgrim Baxter's star portfolio managers, spent roughly 90 minutes sitting within four feet of one another in a worn courtroom here on May 28 as they waited for their lawyers to emerge from closed-door meetings with a Massachusetts Superior Court judge. Judge Patrick J. King, who was scheduled to hear arguments on whether McCall should be released from an employment agreement he signed with Pilgrim Baxter, appeared to be engaged in an effort to broker a settlement in lawsuits between McCall and the firm.

ING Funds has filed with the SEC to create an Internet fund. The registration is expected to become effective in July.

Amicus Networks of Austin, Tex., and Vestment Consulting Services of Bloomington, Minn., have formed an alliance to help mutual funds and other financial service companies meet compliance requirements via the Internet.

WASHINGTON - The leading trade group for broker/dealers is hoping to reach an agreement with the Investment Company Institute on a proposal modifying the rules which prohibit transactions between a broker/dealer and a mutual fund.

A proxy advisory firm has been compelled to do a 180-degree turn on its recommendations to shareholders of the $166 million Emerging Markets Infrastructure Fund, managed by Credit Suisse Asset Management.

A recent federal court ruling gives plaintiffs' attorneys additional encouragement to bring suits against mutual fund companies.

Lawyers are scheduled to appear in a Boston court Friday to argue over whether James D. McCall, a portfolio manager at Pilgrim Baxter & Associates, should be allowed to leave the firm and join Merrill Lynch & Co.

The SEC last week fined Datek Online Brokerage Services Corp. of Iselin, N.J. $50,000 for failing to segregate customer funds and for books and records violations. Datek's former chief financial officer, Moishe Zelcer, was fined $10,000 in the case, which was filed May 18. Datek and Zelcer agreed to the fine and other sanctions without admitting or denying the SEC's allegations. The SEC said that on 12 occasions this spring, Datek used customer funds to meet the firm's obligations.

Mutual fund companies have until December 1999 to create simplified prospectuses so they and the SEC's Division of Investment Management have their hands full with that task until at least then.

The Vanguard Group of Valley Forge, Pa., has posted its Y2K preparation filing with the SEC in a section of its website, www.vanguard.com, devoted to the Year 2000.

The SEC wants to divide responsibility between mutual fund boards and custodians for oversight of the foreign companies which keep possession and records of the foreign stocks and bonds mutual funds own.

The SEC last week brought its first action against a mutual fund adviser regarding preparedness for computer problems arising from the turn of the century.

BOSTON - A federal court judge here appears likely to substantially reduce and perhaps dismiss a lawsuit which challenges the independence of Fidelity Investments' mutual fund directors.

NEW YORK - The Securities and Exchange Commission is considering several amendments to the Investment Company Act to strengthen the role of independent directors of mutual fund companies, Paul Roye, the SEC's director of investment management, said last week. Roye spoke at a conference hosted by The Practising Law Institute of New York.

The mutual fund and securities industries are urging the SEC to delay and substantially revise proposed new rules which would set quality standards for transfer agents and broker/dealers.

For the first time, an SEC judge has set some limits on what expenses a mutual fund can include as part of its Rule 12b-1 fee.

The mutual fund industry has been slow to adopt the summary or "profile" prospectus in part because of a desire to make salespeople indispensable.

The Securities and Exchange Commission has added a calculator to its website that allows investors to determine the total costs of investing in any given mutual fund.

SEC examiners have begun informally questioning mutual fund companies on what their funds spend and receive for executing securities trades.

A recent agreement struck between "Big Five" accounting firm Deloitte & Touche and the SEC has captured the attention of both the accounting and mutual fund industries. At issue is just how far removed members of an accounting firm chosen to audit specific mutual funds must be to protect objectivity and maintain true independence.