SEC Settlements Impose Cease-and-Desist Orders and Penalties Against Investment Advisors for Noncompliant Dividend Distribution Disclosures and Misleading Statements

December 01, 2007

Recent Securities and Exchange Commission ("SEC") actions in four administrative proceedings illustrate the SEC's heightened scrutiny of required dividend distribution disclosures and the need for registered investment companies to review their compliance procedures to avoid penalties. These proceedings involved failure to disclose in dividend distribution notices that the distributions were made from shareholder capital and other violations of the dividend reporting requirements under Section 19(a) of the Investment Company Act of 1940 ("Act") and Rule 19a-1 thereunder. Two of the cases also involved violations of the antifraud provisions of Section 34(b) of the Act. Without admitting or denying the SEC's findings, each of the parties settled the charges by agreeing to the issuance of a cease-and-desist order and payment of civil penalties. 

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