SEC seeks fund data
from Bank of Hawaii
and Prospect AssetThe agency's information-only
requests are part of a national
sweep amid an industry scandal
As part of an industrywide probe, the Securities and Exchange Commission has requested information about the money management activities of two international fund managers in Hawaii.
Bank of Hawaii and Hawaii Kai-based Prospect Asset Management Inc. each received records requests from the SEC in September, along with about 90 other mutual fund families and about 35 brokerage firms.
Bill Henry, executive vice president of Bankoh's investment services group, said the federal regulator wanted information about Pacific Capital Funds. Pacific Capital Funds is the largest mutual fund family based in Hawaii. It's part of the Asset Management Group, which manages more than $8.5 billion.
"It was an information request, not an inquiry or an investigation," Henry said. "Pacific Capital Funds has had excellent performance this year."
As part of an industry sweep, the SEC has requested information from many companies about late-day trading, market timing and the pricing of securities, he said. The requests came after the SEC began investigating several mutual fund companies.
Bankoh has not been contacted by the SEC or notified of any wrongdoing since turning over records, Henry said.
"They haven't indicated that any further action is required by the bank," he said.
Hamilton Smith, spokesman for Prospect, said the SEC asked the financial company for information about its $2.5 million Japan Smaller Companies Fund. Smith said he thinks all local international funds were part of the SEC probe.
"It was part of a blanket sweep," Smith said. "I think they queried all the international funds."
Since turning over records to the SEC, Prospect has not received further communication from the federal regulator, Smith said.
Both Henry and Smith said their companies have not engaged in market timing or late trading.
To discourage market timing violations, both Pacific Capital Funds and the Japan Smaller Companies Fund have instituted redemption fee policies. If an investor wants to exit a fund within 90 days, they must pay a 2 percent redemption fee.
In other business, the parent companies of Charles Schwab & Co. Inc. and Morgan Stanley also have joined the list of mutual funds being investigated by the SEC for improper market timing or illegal trading, practices that benefit certain investors at the expense of others.
"We are like many other companies in the mutual fund industry that have been contacted by regulators to help them better understand how mutual fund transactions occur," said Colleen Blacktin, vice president and manager of Charles Schwab Honolulu Investment Center.
"We support any and all processes that attempt to further protect the interests of our clients and shareholders in all mutual fund investments."
Out of the 33 million-plus trades performed at Schwab in 2001, the SEC has identified 18 problematic trades.
"In the millions of trades we have processed, over 99.99 percent appear to be fine," said David S. Pottruck, Schwab's chief executive officer.
Yesterday, Morgan Stanley agreed to pay a $50 million fine and change some practices to settle an investigation of its mutual fund business by federal and industry regulators. The SEC charged that the brokerage firm gave preferential treatment to some mutual fund companies and failed to disclose the practice to investors.
The SEC is also investigating Putnam Investments, Prudential, Janus, Strong Capital, Bank of America, Bank One, Alliance Capital, Alger Management, Federated Investors and Pilgrim Baxter.
