The Securities and Exchange Commission is to distribute approximately USD38 million in Fair Funds to 810 mutual funds that were victims of fraudulent market timing and late trading by the Veras hedge funds.
The funds distributed are a reflection of the entirety of the penalties paid by the Veras hedge funds and their principals to settle charges brought against them by the SEC of unlawful market timing and late trading. The Sarbanes-Oxley Act of 2002 gave the SEC authority to increase the amount of money returned to harmed investors by allowing civil penalties to be included in Fair Fund distributions. Prior to SOX, only disgorgement could be returned to harmed investors. To date, the SEC has distributed over USD1 billion in Fair Funds.
“Today’s distribution marks another significant step in the Commission’s vigorous program to return money to investors injured by mutual fund trading abuses,” says Linda Chatman Thomsen, the Director of the Division of Enforcement at the SEC.
On 22 Dec 2005, the SEC brought settled administrative proceedings against the Veras Capital Master Fund, VEY Partners Master Fund, Veras Investment Partners, Kevin D. Larson, and James R. McBride for their participation in a fraudulent market timing and late trading scheme. They agreed to the settlement without admitting or denying any wrongdoing.
The settlement order called for the Fair Funds to be distributed directly to the mutual funds affected by Veras’ misconduct. The settlement funds are currently being distributed by the US Treasury directly to the affected mutual funds.