The Securities and Exchange Commission announces the start of a USD267 million Fair Fund distribution to mutual funds and mutual fund shareholders who were harmed by late trading and market timing that occurred through Bear Stearns, which was charged by the SEC in a 2006 enforcement action.
Today’s disbursement of more than USD216 million will go to approximately 761,000 shareholders who were harmed by the wrongdoing, and to the asset bases of more than 1,000 affected mutual funds. The Bear Stearns Fair Fund will ultimately return more than USD267 million to harmed mutual funds and shareholders before the end of this year.
The Sarbanes-Oxley Act of 2002 gave the SEC authority to increase the amount of money returned to injured investors by allowing civil penalties to be included in Fair Fund distributions. Prior to SOX, only disgorgement could be returned to investors.
The SEC brought and settled public administrative and cease-and-desist proceedings against Bear Stearns & Co., Inc. and Bear, Stearns Securities Corp. in March 2006 for violations of the federal securities laws in connection with late trading and market timing of mutual funds. The SEC’s order found that shareholders were harmed by the late trading and market timing of mutual funds facilitated by Bear Stearns from January 1999 through October 2003.
Bear Stearns consented to the order without admitting or denying the findings. Among other things, the order required Bear Stearns to pay USD250 million in disgorgement and penalties for distribution through a Fair Fund. The SEC issued an order approving the Bear Stearns Distribution Plan on 4 February 2009.
“We are very pleased to make this first distribution from the Bear Stearns Fair Fund to injured mutual funds and their shareholders and look forward to disbursing the remaining money in the coming months,” says James A. Clarkson, acting director of the New York Regional Office, SEC.
“The SEC staff continues to work diligently to ensure the distribution of Fair Funds to affected funds and investors, says Dick D’Anna, director of the Office of Collections and Distributions. Since passage of the Sarbanes-Oxley Act, the SEC has now returned more than USD5 billion in lost funds to harmed investors.”
L.D.