INTECH Investment Management and David E. Hurley, former COO, agreed to pay a total of $350,000 in penalties to settle SEC charges that they violated the agencys proxy voting disclosure rule.
The SEC claimed INTECH and Mr. Hurley did not fully disclose that the company used guidelines of a third-party service in voting proxies that followed recommendations of the AFL-CIO while INTECH was participating in an AFL-CIO survey ranking money managers on their proxy voting records. INTECH allegedly believed that following the third-party voting guidelines would improve its score in the AFL-CIOs survey ranking, thereby helping it attract new union-affiliated clients and curry favor with existing union clients, the SECs order said.
When INTECH advised its clients about its proxy voting policies and procedures, it told clients that because it relied on a third-party proxy voting service, it did not expect that any conflicts would arise in the proxy voting process, according to an SEC news release. Accordingly, the commission order (settling the charges) finds that INTECHs policies and procedures did not include how INTECH would address material potential conflicts of interests that may have arisen between its interests and those of its clients. INTECH also did not sufficiently describe its proxy voting policies and procedures to clients.
INTECH was fined $300,000, while Mr. Hurley was fined $50,000. Also, both were censured and are required to cease and desist from committing or causing any violations and any future violations of those provisions, the news release said.
This has been resolved with our clients since 2006 and has been disclosed in our ADV Part II, Jennifer Young, INTECH president and co-CEO, said in a telephone interview. This represents the formal conclusion of this matter with the SEC.
Ms. Young said Mr. Hurley, who retired in 2008, continues to serve as a part-time consultant to INTECH.
The SEC said the enforcement action was the agencys first concerning a violation of the proxy voting rule, which requires money managers to adopt proxy voting policies, tell their clients about the policies and how they address potential conflicts between the managers and clients interests.