Ethics Newsline®

SEC levels $500,000 penalty against Pax World funds

BOSTON
The U.S. Securities and Exchange Commission (SEC) last week penalized Pax World funds half a million dollars for investing in the types of companies that the firm, which was founded on the basis of socially responsible investment, is supposed to avoid.

As the Associated Press reports, socially responsible funds typically screen out the stocks of polluters, defense contractors, weapons companies, casinos, and firms that produce alcohol and tobacco products. Investors in the socially responsible funds choose to place their money in them based in large part on those promises.

According to the SEC, Pax violated some of those restrictions in the years 2001 through 2006.

Pax owned shares of a major oil and gas firm, even though it violated several of the fund’s screening criteria, according to a report from USA Today. Another fund operated by Pax owned shares issued by a company that garnered revenue from gambling and liquor.

New Hampshire-based Pax did not admit or deny the charges, reports the Union Leader of Manchester, but issued a statement saying that its major socially responsible fund, holding more than 90 percent of its assets, did not purchase any unscreened funds and was not cited by the SEC.

The firm has agreed to the civil penalty and said it will comply with a cease and desist order against future violations of securities law, according to investment adviser trade journal Investment News.

Sources: USA Today, July 31 — AP, July 31 — Investment News, July 30 — Manchester Union Leader, July 30.

For more information, see: Related Newsline story, July 28 — Related Newsline story, July 28 — Related Newsline story, July 21 — Related Newsline story, July 14 — Related Newsline story, July 7.