Wednesday, August 27, 2008

Pax World Fined by S.E.C.

It was sort of bound to happen eventually. An ethics-based investment fund has been nailed by the U.S. Securities and Exchange Commission for, you guessed it, an ethics violation.

Here's the (very good) story from Ron Lieber at the NY Times: Socially Responsible, With Egg on Its Face

When the news broke late last month, it read almost like satire. The Securities and Exchange Commission had charged a mutual fund company that specialized in socially responsible investments with taking stakes in companies involved with alcohol, gambling and military contracting. But it is a true story, and it’s the first time the S.E.C. has encountered this problem. Pax World, one of the oldest practitioners in the field of socially responsible investing, paid a $500,000 penalty.

Lieber's analysis is great; I strongly recommend reading it. But I'll add my own 2 cents' worth....At least 3 issues are worth talking about, here. First, there's the one that on the surface makes this a "juicy" story," namely the fact that it was (gasp!) a so-called "ethical fund" (or socially responsible investment fund) that the S.E.C. nailed.

Read it all here.


Ron Robins said...

Re Pax. Though not stated, it is likely that the pressure to perform for short term goals could be a factor. Most fund managers are measured for their short term performance, even though their investors have a supposed long-term horizon.

The average US mutual fund has over a 100% turnover of its holdings each year! Only when investors and investment managers move to a longer-term focus and will such misdeeds be less.

Incidentally, I’ve been following socially responsible investing for about forty years and have a site that covers the latest news and research on the subject. It’s at

Best wishes, Ron Robins

Alice C. Linsley said...

Thanks for letting me know about your website, Mr. Robbins. I've visited and it looks very interesting. Many blessings!

Ron Robins said...

I'm pleased you found my site interesting. Thanks for visiting it. Ron