SEC Slaps PBHG Founders With Lawsuit

November 20, 2003 ( - The two founders of the PBHG mutual fund have been charged by the US Securities and Exchange Commission (SEC) with fraud related to improper trading of fund shares.

The SEC filed a lawsuit today in a Pennsylvania federal court alleging Harold Baxter and Gary Pilgrim breached their fiduciary duty to the firm’s clients in connection with market timing.   Additionally, the agency said the action was being brought simultaneously with the New York Attorney General Eliot Spitzer’s Office, according to a Reuters report.

Overall, the SEC claims these activities netted Pilgrim approximately $3.9 million in 2000 and 2001.

Last week, PBHG, an asset-management company acquired by South African insurer Old Mutual in 2000, announced the resignations of Baxter, chairman and chief executive of Pilgrim Baxter & Associates, and Pilgrim.   The resignations followed an internal probe conducted by the company that focused on investments made by Pilgrim into a private investment limited partnership that, with Baxter’s knowledge, bought and sold shares in Pilgrim Baxter funds between March 2000 and December 2001 (See Pilgrim Baxter Founders Resign ).

“(The) review has brought into focus conduct that was not, in our view, consistent with the highest standards of professionalbehavior,” David Bullock, who has taken over as Pilgrim Baxter chief executive, said in a statement.