After nearly four years of fund industry insiders wondering what the SEC is doing with billions of fund settlement dollars, the first checks are about to be mailed out, or so the SEC promises. Officials at the commission said Monday that a $125 million Fair Fund distribution will be made to more than 254,000 investors harmed by fraudulent market timing in Pilgrim Baxter & Associates Funds. The distribution is the first in a series of three disbursements that will distribute a total of of about $267 million to more than 384,000 affected investors.
The Securities and Exchange Commission today announced a $125 million Fair Fund distribution to more than 254,000 investors who were harmed by fraudulent market timing in the PBHG Funds between June 1998 and December 2001. Today’s distribution is the first in a series of three disbursements from the Fair Fund that will distribute a total of approximately $267 million to more than 384,000 affected PBHG Funds’ account holders. The Fair Fund resulted from Commission enforcement actions charging unlawful market timing in the PBHG Funds by Pilgrim Baxter & Associates, Ltd. (PBA), Gary L. Pilgrim, and Harold J. Baxter.
“Of the Commission’s many responsibilities under the federal securities laws, one of the most important and indeed most gratifying is providing tangible relief to injured investors,” said Linda Chatman Thomsen, Director of the Division of Enforcement. “Today’s distribution is a significant milestone in remedying harm that investors in the PBHG Funds suffered.”
The Fair Fund provision of the Sarbanes-Oxley Act of 2002 enabled the SEC to increase the amount of money returned to harmed investors by allowing financial penalties paid by wrongdoers to be included in the distributions. Prior to the enactment of Sarbanes-Oxley, only disgorgement could be returned to affected investors. To date, the SEC has distributed more than $1 billion in Fair Fund monies.
In 2004, the Commission brought and settled public administrative and cease-and-desist proceedings against PBA, which consented to a Commission Order charging antifraud violations without admitting or denying the Commission’s findings. The Commission ordered PBA to pay $40 million in disgorgement and $50 million in penalties. The Commission later settled administrative and cease-and-desist proceedings against PBA’s two former principals, Pilgrim and Baxter, who also consented to Commission Orders charging antifraud violations without admitting or denying the Commission’s findings. The Commission ordered them to each pay $60 million in disgorgement and $20 million in penalties for distribution through the Fair Fund.
The Commission anticipates that the second and third distributions from the Fair Fund to PBHG Funds’ accountholders will occur before Sept. 30, 2007.
Investors can obtain additional information about the distribution process, including a copy of the Distribution Plan, by visiting http://www.pbafairfundsettlements.com or by calling the Administrator of the Distribution Plan at (800) 920-5408.
Stay ahead of the news ... Sign up for our email alerts now