Products August 14, 2009

Vanguard Clamps Down on PRIMECAP Asset Growth

The Vanguard Group has shuttered its PRIMECAP Core Fund to advisers and institutional clients such as defined benefit plans, endowments, and foundations.

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The  investment management company said in a news release, however, that the $3.8-billion fund (VPCCX) remains opens without purchase limits to defined contribution plan participants.

The Core Fund will not accept new accounts from most retail clients and Vanguard has limited additional share purchases by existing shareholders to $25,000 annually. The company has also placed a $25,000 annual limit on additional share purchases of Vanguard PRIMECAP Fund and Vanguard Capital Opportunity Fund by Flagship clients.

“Despite the market volatility, Vanguard investors are continuing to commit assets to our stock and bond funds and ETFs,” said Vanguard CEO Bill McNabb, who noted that net cash inflows into Vanguard’s long-term funds totaled nearly $60 billion in the first half of 2009. “We are taking preemptive steps to limit the growth of PRIMECAP Core Fund and its sister funds, with the goal of enabling the team at PRIMECAP Management to continue to implement their investment strategy in an effective manner.”

Based in Pasadena, California, PRIMECAP Management currently manages $37 billion in Vanguard investment products.

Compliance August 13, 2009

AXA Advisors Fined for Fraudulent Rollovers

The Securities and Exchange Commission (SEC) fined AXA Advisors $50,000 related to retirement-fund fraud by a registered representative.

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The SEC said in an administrative order Tuesday that Gordon R. Moore, a former registered representative at AXA Advisors, fraudulently induced investors, the majority of whom were current teachers in Colorado public schools, to roll over their investments from their Colorado Public Employees’ Association (PERA) 401(k) accounts into 403(b) products offered by AXA Advisors. However, the investors were not eligible to make the rollovers because they had not terminated their PERA-eligible employment or reached the age of 59 and 1/2.

Moore worked in the Longmont, Colorado, office from 2001 to 2007. In 2008, Moore pled guilty to securities fraud, theft, and computer crime and was sentenced to two years probation and ordered to pay criminal restitution in an amount based on the commissions he earned from his fraudulent activities. The SEC settled with Moore, barring him from association with any broker, dealer, or investment adviser.

The SEC said AXA Advisors failed to reasonably supervise Moore, who completed more than 130 fraudulent rollovers. However, the SEC also said AXA Advisors promptly made significant improvements to its supervisory system, ultimately resulting in no monetary harm incurred by the participants.

AXA Advisors settled with the SEC without admitting or denying the findings.

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