On September 15, 2004, Bridgeway Capital Management, Inc. ("Bridgeway Capital") settled an Administrative Proceeding with the United States Securities and Exchange Commissions (the "SEC").
Bridgeway Capital is a Texas corporation headquartered in Houston, Texas. Bridgeway Capital has been registered as an investment adviser with the SEC since August 2, 1993. Bridgeway Capital provides investment advisory services to Bridgeway Funds, Inc. ("Bridgeway Funds"), a registered investment company that presently operates 11 mutual funds ("the Funds") with combined net-assets of approximately $2 billion.
John Noland Ryan Montgomery is the founder and president of Bridgeway Capital and Bridgeway Funds. He is also a director of Bridgeway Funds and is the majority owner of Bridgeway Capital. Since the inception of these entities, Montgomery has been the person primarily responsible for their activities. He is responsible for, among other things, setting the policies and investment objectives of the Funds and establishing the performance-based fee under which Bridgeway Capital managed certain of the Funds.
The Administrative Proceeding arose as a result of Bridgeway Capital charging three funds,operated by Bridgeway Funds, performance-based compensation in violation of Section 205 of the Advisers Act. The three affected funds are Aggressive Investors 1, Aggressive Investors 2 and Micro Cap Limited.
Bridgeway Capital charged each of the funds listed below an improper performance-based fee against the fund's current assets instead of against its assets averaged over the period during which the fund's performance was computed, as Section 205 of the Advisers Act requires. As a result, Bridgeway Capital charged the three funds and, consequently, their respective shareholders, approximately $4.4 million in the aggregate more than it would have if its performance-based fees had complied with Section 205.
| FUND | PERIOD SINCE INCEPTION OF PERFORMANCE FEE | NET OVERCHARGE |
|---|---|---|
Aggressive Investors 1 |
July 1, 1995 to March 22, 2004 |
$3,989,346 |
Aggressive Investors 2 |
January 1, 2003 to March 22, 2004 |
$110,365 |
Micro-Cap Limited |
July 1, 1995 to March 22, 2004 |
$307,989 |
The settlement with the SEC provides that Bridgeway Capital will pay disgorgement to the shareholders in the amount of $4.4 million plus $485,714 in pre-judgment interest. In addition, Bridgeway Capital has paid a civil money penalty in the amount of $200,000 and John Montgomery has paid a civil penalty of $50,000 to the U.S. Treasury.
The SEC found that Bridgeway Capital’s appointment of Bernerd E. Young as Independent Distribution Consultant (“IDC”) was not unacceptable. The IDC has overall responsibility for the preparation, execution and completion of the Fair Fund Plan of Distribution.
For additional information, please refer to the “Links to Related Documents” section of this Website.
If you have any questions, please refer to the “Frequently Asked Questions” (F.A.Q.) section of this Website or call the Administrator of the Distribution Plan at (800) 364-3565, Monday through Friday, 9:00 a.m. - 5:00 p.m. Central Time.