7.30. 2008 The SEC brought an administrative action against Pax World Management Corp. (Pax World), the investment adviser to Pax World Growth and Pax High Yield Funds for causing the Funds to violate their socially responsible investing (SRI) restrictions. Under the SRIs, Pax World was not to purchase for the Funds securities issued by companies that derived revenue from certain activities, including the manufacture of weapons, alcohol, tobacco or gambling products. The SEC found that Pax World acted contrary to these representations and violated the Funds' SRI restrictions from 2001 through 2005 when it purchased for the Pax World Growth and High Yield Funds 10 securities that these Funds' SRI restrictions prohibited them from buying, including securities of companies that:

  • derived revenue from the manufacture of alcohol and/or gambling products;
  • derived more than 5% of their revenue from contracts with the U.S. Department of Defense; and
  • failed to satisfy the Funds' environmental or labor standards.

The SEC also found that Pax World failed to consistently follow its own SRI-related policies and procedures with respect to these two funds that required that all securities be screened by Pax World's Social Research Department prior to purchase to ensure compliance with the SRI disclosures. It did not consistently adhere to other SRI-related policies and procedures, including continuously monitoring fund holdings. As a result of conduct during the period from 2001 through 2005, the SEC stated that Pax World Funds held at least one prohibited security at all times from 2001 through early 2006.

The SEC fined Pax World $500,000.

Click http://www.sec.gov/litigation/admin/2008/ia-2761.pdf for a copy of the administrative order.