What Is the Fair Funds for Investors Provision?
The Fair Funds for Investors provision was introduced in 2002 under Section 308(a) of the Sarbanes-Oxley Act (SOX). The Fair Funds for Investors provision was put into place to benefit investors who have lost money because of the illegal or unethical activities of individuals or companies that violate securities regulations. The provision returns wrongful profits, penalties, and fines to defrauded investors.
Key Takeaways
- The Fair Funds for Investors provision was introduced in 2002 under Section 308(a) of the Sarbanes-Oxley Act (SOX).
- The provision returns wrongful profits, penalties, and fines to defrauded investors.
- Prior to the Fair Funds Provision, money recovered by the Securities and Exchange Commission (SEC) in the form of civil penalties levied against regulatory violators was disbursed to the U.S. Treasury; the SEC did not have the right to distribute these funds back to investors who were victimized.
Understanding Fair Funds for Investors
Prior to the Fair Funds Provision, money recovered by the Securities and Exchange Commission (SEC) in the form of civil penalties levied against regulatory violators was disbursed to the U.S. Treasury; the SEC did not have the right to distribute these funds back to investors who were victimized. The Fair Funds for Investors provision enabled the SEC to add civil money penalties to disgorgement funds for the relief of the victims of stock swindles.
The provision established a fund that holds money recovered from an SEC case. The fund then chooses how to distribute the money to defrauded investors. After the funds are disbursed, the particular fund is terminated.
The Fair Funds for Investors provision has compensated investors who have been victimized by collusion between funds and brokers, interest-rate fixing, undisclosed fees, false advertising, late trading, pump-and-dump schemes, mutual fund market timing, and other forms of securities fraud and manipulation.
In most of these cases, victims can’t pursue private litigation, either because it is inaccessible, or impractical. Most investors who receive Fair Funds distributions get no compensation from private litigation for this reason; the Fair Funds provision, however, provides their only means of access to compensation. Research has shown they are usually compensated on a level equal to at least 80% of what they lost.
Research on the Effectiveness of the Fair Funds for Investors Provision
In 2014, Urska Velikonja of Emory University published research on the Fair Funds for Investors provision in the Stanford Law Review. The report found that the SEC’s efforts to compensate defrauded investors via the provision has been more successful than opponents of the provision expected. Between 2002 and 2013, the provision allowed the SEC to distribute $14.46 billion to investors who were victimized by fraud. The average fair fund disbursem*nt is about the same size as the average class action settlement disbursem*nt related to securities class action suits.
Velikonja’s research further found that the provision compensates investors for different kinds of misconduct more effectively than private securities litigation. Most private litigation compensates investors for accounting fraud, while fair funds compensate investors who have been the victim of anticompetitive behavior or consumer fraud.
Velikonja’s research also found that defendants are more likely to contribute to Fair Funds for Investors distributions than they are to pay damages related to private litigation.
FAQs
The Fair Funds for Investors provision was put into place to benefit investors who have lost money because of the illegal or unethical activities of individuals or companies that violate securities regulations. The provision returns wrongful profits, penalties, and fines to defrauded investors.
What is a Fair Fund payment? ›
Fair Funds hold money recovered from an SEC case, then choose how to distribute the money to defrauded investors, and does so, then terminates. Note that under Kokesh v. Securities and Exchange Commission, 137 S. Ct. 1635 (2017), disgorgement is considered a penalty, and therefore a punishment.
How much is the Baxter Fair Fund payout? ›
What is the total amount of the Baxter Fair Fund? The Baxter Fair Fund includes the $18,314,359.00 paid by Baxter, Jeffrey Schaible, and Scott Bohaboy. The Baxter Fair Fund has been deposited at the United States Department of the Treasury for investment.
Has the GE Fair Fund paid out yet? ›
5. The Respondent has paid in full. The Fair Fund has been deposited at the United States Department of the Treasury's Bureau of the Fiscal Service (“BFS”) for investment.
How do F Series funds work? ›
Fee-based series (Series F)
These series or classes are available to investors who have fee-based arrangements with their advisor. An investor in a fee-based series or class typically negotiates the rate of their advisor's fee with, and pays such fee directly to, the advisor.
What is the average payout for the Facebook Fair Fund? ›
Each claimant will receive approximately $30 on average. The payout amount is based on the number of valid claims that were filed. U.S. District Judge Vince Chhabria said the amount was lower than expected but is clearly a result of the unprecedented number of claims filed.
What is the expected payout for the Facebook Fair Fund? ›
The payout amount is expected to average $30 a person. More than 17 million valid claims were filed before the deadline of August 25.
What are Baxters profits? ›
On an adjusted basis, 2023 income from continuing operations totaled $2.60 per diluted share. Total adjusted net income attributable to Baxter totaled $1.48 billion or $2.92 per diluted share, which included earnings of $0.32 from discontinued operations.
What is the stock symbol for Baxter Fair Fund? ›
NYSE: BAX. Data as of Apr 11, 2024 4:00 PM Minimum 15 minutes delayed.
How does Baxter make money? ›
Baxter's Medical Products and Therapies segment, which makes IV solutions and infusion pumps, recorded quarterly sales of $266 million, up 2.7%. The company, which also manufactures dialysis products, reported fourth-quarter revenue of $3.89 billion, beating estimates of $3.80 billion, according to LSEG data.
Holders of GE common stock will receive one share of GE Vernova common stock for every four shares of GE common stock held as of the close of business on the record date, March 19, 2024. Following the spin-off, GE Vernova will become an independent, publicly traded company.
How do I cash in GE stock? ›
If you want to sell your shares of GE stock, please contact GE's current transfer agent, Equiniti Trust Company (EQ). Note that sales are subject to a fee of $10 per transaction plus $0.15 per share sold. This fee structure was not changed as part of the switch to Equiniti Trust Company (EQ) as new transfer agent.
How much is GE in debt? ›
Total debt on the balance sheet as of December 2023 : $22.93 B. According to General Electric's latest financial reports the company's total debt is $22.93 B. A company's total debt is the sum of all current and non-current debts.
What are D series funds? ›
Series D mutual funds are specifically designed for self-directed investors who prefer to do their own research and make their own investment decisions, with lower costs than the Series A versions of the same fund. Series D and A mutual funds available on BMO InvestorLine.
What is the difference between Class A and Class F funds? ›
If you wish to pay fees, investors have to buy a certain type of mutual fund share called Class “F”. Other investors prefer to pay a commission rather than a fee and have the commission built into the price of the mutual fund. This is the Class “A” fund.
What is the difference between A and F funds? ›
With Series F mutual funds, the account fee (service fee or dealer fee) is charged directly to the investor, whereas with Series A mutual funds, MERs include an embedded trailing commission.
What is the difference between an A fund and an F fund? ›
If you wish to pay fees, investors have to buy a certain type of mutual fund share called Class “F”. Other investors prefer to pay a commission rather than a fee and have the commission built into the price of the mutual fund. This is the Class “A” fund.
What is the Baxter Fair Fund? ›
“Baxter Fair Fund” means the fund created by the Commission pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 for the benefit of investors harmed by the violations of the Respondents in the Orders.
What are the Fair Fund provisions of Section 308 A of the Sarbanes-Oxley Act of 2002? ›
This provision enables the return of wrongful profits, penalties, and fines to defrauded investors. The Fair Funds for Investors provision was introduced in 2002 under Section 308(a) of the Sarbanes-Oxley Act (SOX). It returns wrongful profits, penalties, and fines to defrauded investors.
