PROVIDENCE, R.I. Pax World Management Corp. on July 30 agreed to settle Securities and Exchange Commission charges that it violated its own socially responsible investment restrictions.
The SEC complaint said Pax World failed to screen 8% of all new security purchases for the growth and high-yield funds from 2001 to 2005.
Pax World had violated the funds SRI restrictions, which prohibited them from buying securities of companies that derived revenue from the manufacture of alcohol or gambling products or derived more than 5% of their revenue from contracts with the U.S. Department of Defense or failed to satisfy the funds environmental or labor standards, the filing said. Pax World Funds held at least one security that violated their SRI restrictions at all times from 2001 through early 2006, the SEC complaint said.
Pax World officials agreed to settle the charges, filed as an SEC administrative proceeding, and pay a penalty of $500,000. In the settlement, Pax World did not admit or deny the SEC findings.
Its believed to be the first SEC enforcement action against a firm for violating its own SRI investment rules, Celia Moore, deputy assistant regional director of the SECs Boston office, said in an interview.
No restitution fund to investors will be set up, Ms. Moore said in the interview. There was no allegation of quantifiable monetary harm to investors and there is no provision in the (SEC administrative proceeding) order for disgorgement, Ms. Moore said.
Joseph F. Keefe, Pax World Management president and CEO, said in an interview, There is no allegation that performance was affected in any manner (by the actions) or any claims that Pax World profited from this or any damages to shareholders.
Pax World manages a total of $2.6 billion, about 5% of which is from institutional investors, Mr. Keefe said. The two funds in the SEC case now have about $100 million each in assets, up from about $50 million each in 2005, he said.
Mr. Keefe was brought in as CEO to address the firms deficiencies in compliance and control, he said. The portfolio managers of the two funds in the case as well as the head of the social research department and outside counsel and chief compliance officer are no longer employed by the firm, Mr. Keefe said.
Contact Barry B. Burr at [email protected]