The Securities and Exchange Commission (SEC) has 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.
First of Three
According to the SEC, the 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 (see SEC Slaps PBHG Founders With Lawsuit ). The SEC estimates that distributions two and three will occur before September 30, 2007.
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 SEC’s findings. The SEC ordered PBA to pay $40 million in disgorgement and $50 million in penalties, and 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 SEC’s findings (see Regulators Settle Market Timing Case with Pilgrim, Baxter ). The SEC ordered them to each pay $60 million in disgorgement and $20 million in penalties for distribution through the Fair Fund.
“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, according to a press release.
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.