SEC Resolves Fee Case

The U.S. Securities and Exchange Commission has negotiated a settlement with an insurer-owned money manager over fund fee concerns and fee disclosure concerns.

The settlement resolves an SEC proceeding involving New York Life Investment Management L.L.C., a subsidiary of New York Life Insurance Company, New York.

NYLIM has agreed to pay a total of about $6.1 million into a settlement fund in connection with the settlement, SEC officials say.

“We are pleased that, with this settlement, the SEC’s inquiry into this matter has been resolved,” NYLIM representative John Puccio says.

The SEC began the proceedings in response to allegations of management-fee problems at NYLIM’s MainStay Equity Index Fund.

NYLIM told investors that an affiliate would make up the difference if, 10 years after an investor bought an Equity Index Fund share, the sum of the tenth-year net asset value and all dividends and distributions paid on the share was lower than the original purchase price.

NYLIM did not tell investors it was charging them for the guarantee, SEC officials allege.

In 2001, New York Life Insurance Company began to analyze exposure associated with the guarantee, and it closed the Equity Index Fund to new investors Jan. 1, 2002, SEC officials report.

NYLIM set aside $2 million in reserves for the fund guarantee in 2001, and $11.9 million in fund guarantee reserves in 2003, officials report.

When NYLIM was managing the fund from early 2002 through June 30, 2004, it charged management fees that were higher the management fees charged by managers of most similar funds analyzed, and it told the fund trustees that they should consider the value of the fund guarantee when assessing the management fees, SEC officials allege.

The NYLIM managers did not give the trustees enough information about the costs associated with the guarantee, officials allege.