A Midwestern mutual fund shop and its chief financial officer just settled with the SEC over CEO pay disclosures.
Yesterday the regulatory agency issued
a cease-and-desist order, and accepted a proposed settlement from, Kornitzer Capital Management
] and KCM CFO (and former chief compliance officer) Barry Koster
. The SEC attacks the Shawnee Mission, Kansas-based mutual fund shop over Koster's 2010-2013 disclosures of how KCM allocated expenses, specifically compensation for KCM founder and CEO John Kornizter
, to Kornitzer's mutual fund family, the Buffalo Funds
could not immediately reach Koster himself or John Kornitzer for comment on the settlement.
KCM and Koster agreed to the SEC settlement "without admitting or denying the findings." KCM agreed to pay a $50,000 fine, and Koster agreed to pay a $25,000 fine. The SEC's order also notes that, as of this month, Koster no longer serves as CCO to KCM or to the Buffalo Funds.
The regulatory agency accuses Koster ("acting on behalf of KCM") of, on the one hand, trying to smooth out KCM's annual pre-tax net profit margin by tweaking what percentage of John Kornitzer's pay was allocated to the funds, while on the other hand telling the Buffalo Funds' board that employee pay was allocated to the funds "based on estimated labor hours."
The SEC's order follows an examination by staff in the regulatory agency's Denver regional office. And the case is part of an enforcement division asset management initiative focused on the 15(c) process (the section of the '40 Act under which mutual fund boards evaluate advisory agreements).
"Accurate and complete information is the lifeblood of the Section 15(c) process," Marshall Sprung
, co-chief of the SEC enforcement division's asset management unit, tells MFWire
in an e-mailed statement. "When advisers withhold or alter information, they prevent mutual fund directors from fulfilling their essential oversight role in evaluating an adviser's contract and related fee."
According to KCM's latest form filed March 5, 2015 with the SEC, the mutual fund shop has 42 employees and $11.317 billion in assets under management. As of June 30, 2014, Morningstar estimates
, the 10 Buffalo funds alone had about $8.025 billion in total AUM. KCM also offers separately managed accounts.
Neil Anderson, Managing Editor
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