A registered investment adviser of open-end mutual funds and its broker-dealer affiliate agreed to pay more than $22.6 million in disgorgement and penalties to settle charges that they caused fund assets to improperly pay for marketing and distribution services as well as amounts exceeding annual expense caps. The settlement amount reflects a penalty reduction for self-reporting the violations, prompt remediation, and cooperation with the investigation. (In the Matter of Calvert Investment Management and Calvert Investment Distributors, Release No. IA-4696, May 2, 2017).
The SEC found that Calvert Investment Management, a registered investment adviser of mutual funds, and Calvert Investment Distributors, Inc., its broker-dealer affiliate, (together, "Calvert") caused the mutual funds to use approximately $14.87 million in fund assets to pay for distribution-related services, rather than making those payments out of Calvert’s assets. Any payments from fund assets for distribution-related services were required to be made pursuant to a written, approved Rule 12b-1 plan, but Calvert utilized fund assets outside the funds’ 12b-1 plans.
Calvert also used fund assets to pay intermediaries approximately $2.96 million for sub-transfer agency services in excess of the funds’ established 30 basis-point expense caps.
The SEC found that Calvert violated Investment Company Act Section 12(b) and Rule 12b-1 thereunder for causing fund assets to improperly pay nearly $18 million to distribute and market shares outside of the funds’ Rule 12b-1 plan. In addition, Calvert violated Advisers Act Section 206(2) for deceiving the mutual funds and Investment Company Act Section 34(b) for material misstatements in fund prospectuses concerning the improper payments.
Without admitting or denying the SEC’s findings, Calvert agreed to pay disgorgement and interest of over $21.6 million plus a $1 million penalty to settle the charges.
The release is No. IA-4696.
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