October 24, 1989
TO: SEC RULES MEMBERS NO. 62-89
INVESTMENT ADVISER MEMBERS NO. 54-89
RE: SANCTIONS IMPOSED AGAINST A FUND'S ADVISER AND PRESIDENT OF
THE ADVISER
__________________________________________________________
Attached is an SEC enforcement order imposing sanctions
against a fund's adviser and the president of the adviser. Based
on a finding by the SEC of violations of the Investment Company
Act of 1940 (the "1940 Act") and the Investment Advisers Act of
1940 (the "Advisers Act"), the investment adviser to a mutual
fund and the adviser's president, who is also the chief executive
and financial officer and owner of more than 50% of the
outstanding shares of the adviser (the "president"), were
permanently prohibited from serving as an employee, officer,
director or member of an advisory board, investment adviser or
depositor of, or principal underwriter for, a registered
investment company or affiliated person of any of the foregoing.
The president and the adviser were also compelled to refrain for
a period of six months from soliciting or accepting new advisory
clients.
The SEC found that the president had aided and abetted the
fund's violation of the provisions of the 1940 Act governing:
the fund's custodial agreement; the "joint insured" bond of the
fund; maintenance of reports made by "access persons"; the sale,
redemption or repurchase of the fund's redeemable securities at
current net asset value; redemption of the fund's shares;
maintenance of the fund's books and records; and, the selection
of the fund's independent public accountant.
With respect to the adviser's activities, the SEC found that
the president and the adviser willfully violated sections 15(a)
(approval of the advisory contract) and 17(a)(2) (prohibition
against an affiliated person, acting as principal, from
purchasing securities from the fund of which the fund was not the
issuer) of the 1940 Act. Moreover, findings were made that the
president and the adviser violated various provisions of the
Advisers Act.
Amy B. Rosenblum
Assistant General Counsel
Attachment