The SEC charged Kelmoore Investment Company, Inc. (Kelmoore), an investment adviser located in Palo Alto, California, with inadequate disclosure of its advisory fee to shareholders of mutual funds (Kelmoore Funds) that it advises. The SEC stated that Kelmoore purported to charge investors a 1% advisory fee. However, if Kelmoore had adequately disclosed all its advisory charges, the fees would have ranged from 1.5% to over 3%. Without admitting or denying the SEC's findings, Kelmoore agreed to pay a $100,000 penalty and to undertake certain compliance reforms.

The SEC found that from 1999 to 2005, Kelmoore acted as both investment adviser and securities broker for five mutual funds. Kelmoore's fund prospectuses and related documents informed investors that it charged an advisory fee totaling 1% of assets under management. According to the SEC, these documents suggested that all of the significant advisory services performed by Kelmoore were covered by the 1% fee. However, the SEC found that Kelmoore failed to inform investors that the firm internally categorized most services it was providing as brokerage, rather than advisory, and was charging investors substantial brokerage commissions on top of the 1% fee. According to the SEC, had Kelmoore actually calculated the fee in the manner suggested by its written disclosures, the fee would have been as high as 3.63%. As a result of the alleged misleading disclosures, the SEC found, it would have been difficult for investors to understand the actual amount they were paying for advisory services or make an informed investment decision when comparing the Kelmoore Funds to other mutual funds.