The SEC is continuing to crack down on fund firms that improperly apply performance-based fees to their funds. This time five firms -- Mellon's Dreyfus, Nationwide's Gartmore Mutual Fund Capital Trust, Kensington Investment Group, Numeric Investors, and Marsh & McLennan's Putnam Investment Management -- agreed to pay $7 million as compensation for charging excessive fees between April 1997 and December 2004.

The SEC censured the five firms and ordered them cease-and-desist from violations of Section 205, reimbursed the affected funds, plus interest. The firms did not admit or deny any wrongdoing as part of the settlement.

The crackdown was instigated by the SEC's discovery of a similar problem in charging performance-based fees at Bridgeway Capital Management in 2004. The SEC's Fort Worth, Texas, office -- which has Bridgeway in its jurisdiction -- launched the sweep investigation.

"As a result of that case, we took a look at the industry to determine if this was a larger problem," said Kit Addleman, an SEC associate district administrator. "These five enforcement cases are a result of that sweep."

The biggest error in fees was made by Dreyfus in its Premier NexTech Fund, which overcharged shareholders $2.99 million, according to the SEC. Putnam was next up with fees that surpassed proper levels by $1.3 million in its Research Fund. Numeric's fees in its Small Cap Fund were too high by $919,000 while Gartmore rung up excessive fees of $632,000 and Kensington' Realty Fund paid $617,000 too much. 

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