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Harvard spokesperson Joe Wrinn wrote in an e-mail on Wednesday that the University was aware of the SEC investigation into Capital Research, but that “numerous other mutual fund companies” were also facing SEC scrutiny...
...SEC is reportedly investigating directed brokerage at Capital Research. Directed brokerage occurs when a mutual fund pays a brokerage firm—which completes stock and bond trades for the mutual fund—extra money so that the brokerage firm increases advertising efforts for the mutual fund, Nester said...
...SEC launched an industry-wide investigation of mutual fund sales in November 2003, and Morgan Stanley Dean Witter and Massachusetts Financial Services have been fined $50 million each for undisclosed directed brokerage...
Nester said the SEC aims to change its rules in the near future to make any directed brokerage arrangement illegal...
Capital Research engaged in directed brokerage—a practice American Funds said was “consistent” with SEC regulations—until recently, when it halted the practice to conform with the proposed SEC rule change, according to a statement on its website...