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Thursday, September 05, 2002

Fund Firm Fined

by: Tony Pennino

The Securities and Exchange Commission has decided to institute public administrative and cease-and-desist proceedings against Davis Selected Advisers-NY, Inc. The regulatory body charges that the Davis Opportunity Mutual Fund (RPEAX) was engaged in the rapid trade of initial public offerings -- or "IPO flipping" -- without informing shareholders.

The firm has agreed to pay a fine without acknowledging its guilt or innocence one way or the other, according to an article in today's LA Times. IPO flipping in and of itself is not illegal, but the adviser failed to disclose it was engaged in that activity.

"It is disappointing that the SEC finds that misleading performance numbers is a less serious offense than it was a couple of years ago," Mercer Bullard, founder of Fund Democracy, told the MutualFundWire.com. In 1999 in a similar case involving Van Kampen, that firm was charged with a $100,000 fine (and the responsible executive faced a fine of $25,000).

"The cost of the fine should have been going up, not falling like the stock market," contended Bullock. "Now, the fine has lost 90 percent of its value. This fine is not even a slap on the list. It is surprising in this environment of Enron and Worldcom that Davis would be let off with such a meaningless penalty and that the SEC would send such a message of unconcern about this violation to the industry."

To view the SEC's decision, follow this link

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