In the Matter of Van Kampen Investment Advisory Corp.
Securities and Exchange Commission
Investment Company Act Release No. 23996 (1999)
Van Kampen Investment Advisory Corp. (Van Kampen Advisory) was the investment adviser to Van Kampen Growth Fund (the fund), a new mutual-fund series of Van Kampen Equity Trust. In 1996, the first full calendar year of the fund’s operations, the fund achieved a total return of 61.99 percent from investing seed money provided by its affiliates. Although the fund was not yet open to the public for investment, a third-party fund-rating service ranked the fund the best in its category for 1996. A study initiated by Van Kampen Advisory’s chief investment officer for equity investments (CIO) revealed that a substantial portion of the fund’s 1996 return was attributable to its purchases of shares in hot initial public offerings (IPOs). The CIO did not share the study’s results with the fund’s board of trustees when the board met in January 1997 to review the fund’s performance and approve the fund’s public offering, which commenced in February 1997. Nor was this information shared with senior officers of Van Kampen Advisory and Van Kampen Distributors, the fund’s principal underwriter for its public offering. Van Kampen Distributors disseminated a fact-card advertisement that touted the fund’s 61.99 percent return and top ranking for 1996 but did not disclose that hot IPOs were a major factor in both. The fund’s prospectus and its December 31, 1996, semi-annual report filed by Van Kampen Equity Trust with the Securities and Exchange Commission (SEC) likewise omitted information about the impact of hot IPOs on the fund’s performance. From February 3, 1997, to March 14, 1997, the period the fund was open to the public for investment, it raised approximately $109 million from sales of its shares, and its net assets increased from $1.1 million to $110.1 million. The SEC brought an administrative proceeding against Van Kampen Advisory and its CIO for violations of § 206(2) of the Investment Advisers Act of 1940 (Advisers Act) and § 34(b) of the Investment Company Act of 1940 (Company Act).
Rule of Law
Holding and Reasoning ()
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