In re Veras Capital Master Fund

STATES OF AMERICA 

Before the 

SECUFUTIES AND EXCHANGE COMMISSION 

In the Matter of 
Veras Capital Master Fund, 

VEY Partners Master Fund, 

Veras Investment Partners, LLC, 
Admin. Proc. File No. 3-121 33 

Kevin D. Larson, and 

James 
R. McBride, 

Respondents. 
PLAN OF DISTRIBUTION 
Overview 
This Plan of Distribution ("the Distribution Plan") proposes a methodology for 
distributing the disgorgement, prejudgment interest, and civil penalties paid by 
the Veras Capital 
Partners Master Fund, VEY Master Fund, Veras Investment Partners, LLC, James R. McBride 
("McBride"), and Kevin 
D. Larson ("Larson") (collectively, "Respondents") in settlement of 
administrative proceedings involving findings of deceptive market timing and late trading of 
mutual funds. 
On December 22,2005, Respondents consented to the entry of 
an Order Instituting 
Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act 
of 1933, Section 21C of the Securities Exchange Act of 1934, Section 203(f) of the Investment 
Advisers Act of 1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940, 
Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order ("Order"), 

without admitting or denying the Order's findings. The Order found, among other things, that 
Respondents engaged in a fraudulent scheme to market time and late trade mutual fund shares. 
The Order required, among other things, that Respondents pay disgorgement of 
$35,554,903 ("Disgorgement Amount") and prejudgment interest of $645,585 ("Prejudgment 
Interest"), and that Larson and 
McBride each pay a civil penalty of $750,000 ("Penalty"), for a 
total payment of $37,700,488 ("Settlement Amount"), which Respondents have paid. The Order 
also established a Fair Fund under Section 308(a) of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 
5 7246, and 17 C.F.R. 201.1 100 et seq. promulgated thereunder, and provided for distribution of 
the Fair Fund to the affected mutual funds ("Affected Mutual Funds") (Order, Paragraph 
IV.D.2.). Pursuant to the Order, Respondents undertook in consultation with the staff of the 
Commission to develop the Distribution Plan for Commission approval. Respondents also 
undertook to pay all costs associated with administration of the Distribution Plan. Pursuant to 
Paragraph 22 of the Order, "[flollowing a Commission order approving a distribution plan 
. . . 
Respondents shall take all necessary and appropriate steps to assist the Commission-appointed 
Administrator of the final distribution plan." The Distribution Plan is subject to approval by the 
Commission and the Commission will retain jurisdiction over its implementation. 
,idministration of the Distribution Plan 
1. 
Pumose and Background. The Distribution Plan has been developed pursuant to 
the Order and the SEC Rules on Fair Fund and Disgorgement Plans, 17 C.F.R. 
5 201.1100, et 
seq. 
("Rules"). The Fair Fund constitutes a Qualified Settlement Fund ("QSF") under Section 
468B(g) of the Internal Revenue Code, 26 U.S.C. 
5 468B(g), and related regulations, 26 C.F.R. 
$5 1.468B-1 through 1.468B-5. The Commission has custody of the Fair Fund and shall retain 

control of the assets of the Fair Fund, which is currently deposited at the U.S. Treasury Bureau of 
Public Debt ("BPD") for investment in government obligations. 
2. 
Plan Administrator. Rule 
1105(a) provides that the Commission "shall have the 
authority to appoint any person 
. . . as administrator of a plan of disgorgement of a Fair Fund and 
to delegate to that person responsibility for administering the plan." Rule 1105(a) also provides 
that an administrator may be removed at any time by order of the Commission. Respondents 
have proposed Peter 
J. Henning, Esq., ("Henning") to act as the administrator for the Distribution 
Plan ("the Administrator"). Henning is a professor of corporate and securities law at Wayne 
State University in Detroit, Michigan. The staff of the Commission has no objection to the 
selection of Henning as the Administrator. Henning will be compensated by Respondents. 
3. 
Bonds. Because Henning is not a Commission employee, Rule 1 
105(c) requires 
that he "obtain a bond in the manner prescribed in 11 U.S.C. 
5 322, in an amount to be approved 
by the Commission," but allows the Commission to "waive posting of a bond for good cause 
shown." Respondents request that the bond requirement be waived for Henning. He will not 
have discretion regarding payments made from the Fair Fund because payment recipients and 
amounts will be determined and paid in accordance with the process set forth below. Similarly, 
he will never have possession of the Fair Fund, which will remain at BPD until distribution. 
4. 
Accountinas. As required by Rule 1105(f), "[dluring the first 10 days of each 
calendar quarter 
. . .the administrator shall file an accounting [with the Commission] of all 
monies earned or received and all monies spent in connection with the administration of the plan 
of disgorgement." Within 30 days of the closing of the Distribution Plan, the Administrator will 
provide the Commission with a final accounting, as required by Rule 1 105(f) (the "Final 
Accounting"). The Final Accounting shall reflect all monies earned or received and all monies 

spent in connection with the administration of the Distribution Plan, including the dollar amount 
of undisbursed funds, which shall be remitted to the Treasury's General Fund. 
Distribution Plan and Procedures 
5. 
Specification of Eligible Fair Fund Recipients. Rule 1101(b)(2) provides that a 
plan shall include "[s]pecification of categories of persons potentially eligible to receive 
proceeds of the fund.'' Pursuant to Paragraph IV.D.2. of the Commission's Order, the proceeds 
of the Fair Fund will be paid to the Affected Mutual Funds. Accordingly, the Administrator shall 
distribute the Fair Fund solely to the Affected Mutual Funds. Respondents shall provide to the 
Administrator the list of the Affected Mutual Funds and the disgorgement calculations that form 
the basis of the Commission's Order (the "Disgorgement Amount"). The staff of the 
Commission and the Respondents calculated the Disgorgement Amount using a "next-day NAV" 
analysis. The next-day NAV method computes timing related profits as the product of the 
number of shares purchased by Respondents and the difference between the NAV the day after 
the purchase and the NAV on the day of the purchase, plus the product of the number of shares 
sold by Respondents and the difference between the NAV on the sale date and the NAV on the 
day after the sale. The next-day NAV method thus captures the portion of the late trading and 
market timing profits that the Commission deems to be illegitimate, and is an appropriate method 
for allocating the Fair Fund on the specific facts of this case. The method of calculation of each 
Affected Mutual Fund's share of the Fair Fund is intended to result in a payment to each 
Affected Mutual Fund that restores the impaired value of the Affected Mutual Fund. The 
Commission believes that some of this impaired value is susceptible to calculation, while some 
of this impaired value is not. The method of calculation is intended by the Commission to fairly 

estimate the impaired value that each Affected Mutual Fund has suffered and make a payment in 
that amount. 
6. Methodology for Determining Distributions. The Administrator will determine 
the amount to be distributed to each Affected Mutual Fund (the "Fund Distribution Amount") by 
adding the Disgorgement Amount to a pro-rata apportionment of the Penalty, Prejudgment 
Interest, and interest on funds deposited at the BPD with any further adjustments, as described in 
the paragraphs below. 
7. Procedures for Locating and Notifvina Responsible Persons for the Affected 
Mutual Funds. Rule 1101(b)(3) provides that a plan shall include "[plrocedures for providing 
notice to [potential claimants 
-in this case, the Affected Mutual Funds] of the existence of the 
fund and their potential eligibility to receive proceeds of the fund." The Administrator will 
identify the entity with fiduciary responsibility for each Affected Mutual Fund or its successor 
entity. Within 30 days of the approval of the Distribution Plan, the Administrator will send each 
such fiduciary a notice by United States Postal Service regarding the Commission's approval of 
the Distribution Plan and the procedure for distribution. The Administrator will request from 
each fiduciary information sufficient to accomplish the distribution, including the Tax 
Identification Number for the Affected Mutual Fund, payment address, contact information 
and/or wiring instructions. 
If an Affected Mutual Fund fails to respond within twenty-one days from the mailing of 
the notice, the Administrator shall send a second notice by mail. For those Affected Mutual 
Funds entitled to a Fund Distribution Amount of $50,000 or greater, if an Affected Mutual Fund 
does not respond to the second notice within twenty-one days, the Administrator shall make 
three attempts to contact the Affected Mutual Fund (or its successor) telephonically. 

8. 
Procedures for Making and Approving Claims, Handling Disputed Claims and 
Cut-off Date for Making Claims. Rule 1101(b)(4) provides, among other things, that a plan shall 
include "[p]rocedures for making and approving claims, procedures for handling disputed 
claims, and a cut-off date for the making of claims." Because the list of Affected Mutual Funds 
and the Disgorgement Amounts attributable to each have already been identified by the staff of 
the Commission and Respondents, the Fair Fund will not be distributed according to a 
claims- 
made process. 
9. 
Procedures for the Receipt of Additional Funds. Rule 1 10l(b)(l) provides, 
among other things, that a plan shall include "[p]rocedures for the receipt of additional funds." 
The Fair Fund has been deposited at the BPD for investment in government obligations. Other 
than interest from these investments, it is not anticipated that the Fair Fund will receive 
additional funds. 
10. 
Checks/Electronic Transfers. The Administrator may elect to make payment of 
the Fund Distribution Amount to an Affected Mutual Fund by check or electronic transfer. All 
payments shall be preceded or accompanied with a communication that includes, as appropriate: 
(a) a description characterizing the distribution; (b) a description of the tax information reporting 
and other related tax matters; (c) a statement that checks will be void (non-negotiable) one year 
from the date of issuance; and (d) the name of a person to contact, to be used in the event of any 
questions regarding the distribution. Any such information letter or other mailing to an Affected 
Mutual Fund characterizing its distribution shall be submitted to the assigned Commission staff 
for review and approval. Distribution checks, on their face, or in the accompanying mailing will 
clearly indicate that the money is being distributed from an SEC Fair Fund. Checks that are not 

negotiated within the stale date shall be voided. Electronic credits will be made only to cash 
equivalent accounts (e.g., checking or savings accounts). 
11. 
Implementation of the Plan. The Fair Fund distribution to the Affected Mutual 
Funds will be implemented by the Financial Management Service, United States Department of 
the Treasury ("FMS"), which will issue checks or electronically transfer funds to the Affected 
Mutual Funds pursuant to the procedures contained in the Distribution Plan. The Commission's 
Order previously authorized payment to the Affected Mutual Funds (whose identities were all 
known at the time). It is anticipated that the order issued by the Commission approving the 
Distribution Plan will include a provision authorizing disbursement of the Fair Fund by the 
Administrator. The Fair Fund disbursements will be made as follows: 
a. 
FMS will provide the Administrator with its proprietary software for the 
submission, in "Agency Input Format," of the information necessary to issue checks or 
electronically transfer funds through the Automated Clearing House ("ACH"). 
b. 
The Administrator will compile the information into an electronic file in 
the Agency Input Format and submit this electronic file to the assigned Commission 
staff when, in the Administrator's judgment, he has obtained the information necessary 
to make disbursements to a substantial number of the Affected Mutual Funds; provided, 
however, that the initial distribution shall be 
made no later than 
90 days following 
approval of the Distribution Plan. 
c. 
The list of Affected Mutual Funds and respective Fund Distribution 
Amounts in the electronic file will be validated to Commission staff at the Plan 
Administrator's direction. The validation will state that the electronic file was 

compiled in accordance with the Distribution Plan and provides all the information 
necessary for FMS to make disbursement by check or ACH. 
d. The Commission, through its Office of Financial Management, will 
transmit the electronic file to FMS for the transfer of funds. Within 
48 hours of receipt 
by FMS, checks will be mailed and/or funds will be transferred by the ACH. 
The Administrator will repeat this process as many times as necessary to complete distribution of 
the Fair Fund. 
12. 
Returned ChecksIElectronic Transfer Procedures. FMS will notify the 
Commission, which in turn will notify the Administrator, of any returned items due to non- 
delivery, insufficient addresses, andlor other deficiencies. The Administrator shall be 
responsible for researching and reconciling all errors that result in non-delivery and shall submit 
supplemental electronic files for payment of the returned items, as appropriate. 
13. 
Secondary Distribution. Upon exhaustion of all procedures to identify and locate 
the Affected Mutual Funds and to reconcile all errors that result in non-delivery, if any portion of 
the Fair Fund remains undisbursed (whether because an Affected Mutual Fund has failed to 
supply identifying information to the Administrator, because the Administrator has been unable 
to locate an Affected Mutual Fund, because an Affected Mutual Fund or its successor no longer 
exists, because a check becomes stale, or for some other reason), the Administrator may make a 
secondary distribution of the remaining funds. Such a secondary distribution shall be on a pro 
rata basis to each Affected Mutual Fund that previously received a distribution. The 
Administrator shall make a secondary distribution only if, in the Administrator's judgment, the 
amount of the remaining funds is sufficient to warrant the additional administrative cost of a 
secondary distribution. 

14. Termination of the Distribution Plan. The Administrator shall declare the 
implementation of the Distribution Plan complete the sooner of: (1) one year after the date of 
issuance of the last check, or (2) 
confirmation of negotiation of all outstanding checks (provided 
that all other requirements of this Distribution Plan have been met). 
15. Costs of Administering Funds. Respondents will pay all fees and costs associated 
with administration of the Distribution Plan, including but not limited to any tax compliance fees 
and costs incurred by the Fair Fund and the Administrator's fees. 
16. 
Taxes. The Commission has appointed Damasco 
& Associates as the Tax 
Administrator ("Tax Administrator") of the Fair Fund. The Administrator will cooperate with 
the Tax Administrator in providing information necessary to accomplish the income tax 
compliance, ruling and advice work assigned to the Tax Administrator by the Commission 
during and after implementation of the Fair Fund. The Administrator shall withhold 
from 
distributions to the Affected Mutual Funds an amount sufficient to satisfy any tax liability. The 
Tax Administrator shall be compensated by Respondents. The Administrator and BPD shall be 
authorized to provide account 
information to the Tax Administrator. 
1'7. Amendment. The Distribution Plan may be amended upon the motion of 
Respondents, the Administrator or upon the Commission's own motion. The staff of the 
Commission may extend any deadline contained in the Distribution Plan for good cause shown. 
Notice of Proposed Fair Fund Distribution Plan 
18. 
In accordance with Rule 1103, notice of the Distribution Plan shall be published 
in the SEC Docket and on the Commission's 
website. Any person or entity wishing to comment 
on the Distribution Plan must do so in writing by submitting their comments to the Commission 
within thirty days of the publication date of the Distribution Plan: (a) via first class mail to the 

Office of the Secretary, United States Securities and Exchange Commission, 100 F Street, N.E., 
Washington, DC 20549- 1090; (b) by using the Commission's Internet comment form 
(httl~://www.sec.
~jov/litigation/adn~in.shttnl);or (c) by sending an e-mail to 
comments@,sec.~ov. Please include the appropriate Administrative Proceeding File Number on 
the subject line. 
Submitted on: By: 
Respondents 

STATES OF AMERICA 


Before the 


SECUFUTIES AND EXCHANGE COMMISSION 


In the Matter of 

Veras Capital Master Fund, 

VEY Partners Master Fund, 

Veras Investment Partners, LLC, Admin. Proc. File No. 3-121 33 

Kevin D. Larson, and 

James R. McBride, 


Respondents. 

PLAN OF DISTRIBUTION 

Overview 

This Plan of Distribution ("the Distribution Plan") proposes a methodology for 

distributing the disgorgement, prejudgment interest, and civil penalties paid by the Veras Capital 

Partners Master Fund, VEY Master Fund, Veras Investment Partners, LLC, James R. McBride 

("McBride"), and Kevin D. Larson ("Larson") (collectively, "Respondents") in settlement of 

administrative proceedings involving findings of deceptive market timing and late trading of 

mutual funds. 

On December 22,2005, Respondents consented to the entry of an Order Instituting 

Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act 

of 1933, Section 21C of the Securities Exchange Act of 1934, Section 203(f) of the Investment 

Advisers Act of 1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940, 

Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order ("Order"), 



without admitting or denying the Order's findings. The Order found, among other things, that 

Respondents engaged in a fraudulent scheme to market time and late trade mutual fund shares. 

The Order required, among other things, that Respondents pay disgorgement of 

$35,554,903 ("Disgorgement Amount") and prejudgment interest of $645,585 ("Prejudgment 

Interest"), and that Larson and McBride each pay a civil penalty of $750,000 ("Penalty"), for a 

total payment of $37,700,488 ("Settlement Amount"), which Respondents have paid. The Order 

also established a Fair Fund under Section 308(a) of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 

5 7246, and 17 C.F.R. 201.1 100 et seq. promulgated thereunder, and provided for distribution of 

the Fair Fund to the affected mutual funds ("Affected Mutual Funds") (Order, Paragraph 

IV.D.2.). Pursuant to the Order, Respondents undertook in consultation with the staff of the 

Commission to develop the Distribution Plan for Commission approval. Respondents also 

undertook to pay all costs associated with administration of the Distribution Plan. Pursuant to 

Paragraph 22 of the Order, "[flollowing a Commission order approving a distribution plan . . . 

Respondents shall take all necessary and appropriate steps to assist the Commission-appointed 

Administrator of the final distribution plan." The Distribution Plan is subject to approval by the 

Commission and the Commission will retain jurisdiction over its implementation. 

,idministration of the Distribution Plan 

1. Pumose and Background. The Distribution Plan has been developed pursuant to 

the Order and the SEC Rules on Fair Fund and Disgorgement Plans, 17 C.F.R. 5 201.1100, et 

seq. ("Rules"). The Fair Fund constitutes a Qualified Settlement Fund ("QSF") under Section 

468B(g) of the Internal Revenue Code, 26 U.S.C. 5 468B(g), and related regulations, 26 C.F.R. 

$ 5  1.468B-1 through 1.468B-5. The Commission has custody of the Fair Fund and shall retain 



control of the assets of the Fair Fund, which is currently deposited at the U.S. Treasury Bureau of 

Public Debt ("BPD") for investment in government obligations. 

2. Plan Administrator. Rule 1105(a) provides that the Commission "shall have the 

authority to appoint any person . . . as administrator of a plan of disgorgement of a Fair Fund and 

to delegate to that person responsibility for administering the plan." Rule 1105(a) also provides 

that an administrator may be removed at any time by order of the Commission. Respondents 

have proposed Peter J. Henning, Esq., ("Henning") to act as the administrator for the Distribution 

Plan ("the Administrator"). Henning is a professor of corporate and securities law at Wayne 

State University in Detroit, Michigan. The staff of the Commission has no objection to the 

selection of Henning as the Administrator. Henning will be compensated by Respondents. 

3. Bonds. Because Henning is not a Commission employee, Rule 1 105(c) requires 

that he "obtain a bond in the manner prescribed in 11 U.S.C. 5 322, in an amount to be approved 

by the Commission," but allows the Commission to "waive posting of a bond for good cause 

shown." Respondents request that the bond requirement be waived for Henning. He will not 

have discretion regarding payments made from the Fair Fund because payment recipients and 

amounts will be determined and paid in accordance with the process set forth below. Similarly, 

he will never have possession of the Fair Fund, which will remain at BPD until distribution. 

4. Accountinas. As required by Rule 1105(f), "[dluring the first 10 days of each 

calendar quarter . . . the administrator shall file an accounting [with the Commission] of all 

monies earned or received and all monies spent in connection with the administration of the plan 

of disgorgement." Within 30 days of the closing of the Distribution Plan, the Administrator will 

provide the Commission with a final accounting, as required by Rule 1 105(f) (the "Final 

Accounting"). The Final Accounting shall reflect all monies earned or received and all monies 



spent in connection with the administration of the Distribution Plan, including the dollar amount 

of undisbursed funds, which shall be remitted to the Treasury's General Fund. 

Distribution Plan and Procedures 

5.  Specification of Eligible Fair Fund Recipients. Rule 1101(b)(2) provides that a 

plan shall include "[s]pecification of categories of persons potentially eligible to receive 

proceeds of the fund.'' Pursuant to Paragraph IV.D.2. of the Commission's Order, the proceeds 

of the Fair Fund will be paid to the Affected Mutual Funds. Accordingly, the Administrator shall 

distribute the Fair Fund solely to the Affected Mutual Funds. Respondents shall provide to the 

Administrator the list of the Affected Mutual Funds and the disgorgement calculations that form 

the basis of the Commission's Order (the "Disgorgement Amount"). The staff of the 

Commission and the Respondents calculated the Disgorgement Amount using a "next-day NAV" 

analysis. The next-day NAV method computes timing related profits as the product of the 

number of shares purchased by Respondents and the difference between the NAV the day after 

the purchase and the NAV on the day of the purchase, plus the product of the number of shares 

sold by Respondents and the difference between the NAV on the sale date and the NAV on the 

day after the sale. The next-day NAV method thus captures the portion of the late trading and 

market timing profits that the Commission deems to be illegitimate, and is an appropriate method 

for allocating the Fair Fund on the specific facts of this case. The method of calculation of each 

Affected Mutual Fund's share of the Fair Fund is intended to result in a payment to each 

Affected Mutual Fund that restores the impaired value of the Affected Mutual Fund. The 

Commission believes that some of this impaired value is susceptible to calculation, while some 

of this impaired value is not. The method of calculation is intended by the Commission to fairly 



estimate the impaired value that each Affected Mutual Fund has suffered and make a payment in 

that amount. 

6. Methodology for Determining Distributions. The Administrator will determine 

the amount to be distributed to each Affected Mutual Fund (the "Fund Distribution Amount") by 

adding the Disgorgement Amount to a pro-rata apportionment of the Penalty, Prejudgment 

Interest, and interest on funds deposited at the BPD with any further adjustments, as described in 

the paragraphs below. 

7 .  Procedures for Locating and Notifvina Responsible Persons for the Affected 

Mutual Funds. Rule 1101(b)(3) provides that a plan shall include "[plrocedures for providing 

notice to [potential claimants - in this case, the Affected Mutual Funds] of the existence of the 

fund and their potential eligibility to receive proceeds of the fund." The Administrator will 

identify the entity with fiduciary responsibility for each Affected Mutual Fund or its successor 

entity. Within 30 days of the approval of the Distribution Plan, the Administrator will send each 

such fiduciary a notice by United States Postal Service regarding the Commission's approval of 

the Distribution Plan and the procedure for distribution. The Administrator will request from 

each fiduciary information sufficient to accomplish the distribution, including the Tax 

Identification Number for the Affected Mutual Fund, payment address, contact information 

and/or wiring instructions. 

If an Affected Mutual Fund fails to respond within twenty-one days from the mailing of 

the notice, the Administrator shall send a second notice by mail. For those Affected Mutual 

Funds entitled to a Fund Distribution Amount of $50,000 or greater, if an Affected Mutual Fund 

does not respond to the second notice within twenty-one days, the Administrator shall make 

three attempts to contact the Affected Mutual Fund (or its successor) telephonically. 



8. Procedures for Making and Approving Claims, Handling Disputed Claims and 

Cut-off Date for Making Claims. Rule 1101(b)(4) provides, among other things, that a plan shall 

include "[p]rocedures for making and approving claims, procedures for handling disputed 

claims, and a cut-off date for the making of claims." Because the list of Affected Mutual Funds 

and the Disgorgement Amounts attributable to each have already been identified by the staff of 

the Commission and Respondents, the Fair Fund will not be distributed according to a claims- 

made process. 

9. Procedures for the Receipt of Additional Funds. Rule 1 10l(b)(l) provides, 

among other things, that a plan shall include "[p]rocedures for the receipt of additional funds." 

The Fair Fund has been deposited at the BPD for investment in government obligations. Other 

than interest from these investments, it is not anticipated that the Fair Fund will receive 

additional funds. 

10. Checks/Electronic Transfers. The Administrator may elect to make payment of 

the Fund Distribution Amount to an Affected Mutual Fund by check or electronic transfer. All 

payments shall be preceded or accompanied with a communication that includes, as appropriate: 

(a) a description characterizing the distribution; (b) a description of the tax information reporting 

and other related tax matters; (c) a statement that checks will be void (non-negotiable) one year 

from the date of issuance; and (d) the name of a person to contact, to be used in the event of any 

questions regarding the distribution. Any such information letter or other mailing to an Affected 

Mutual Fund characterizing its distribution shall be submitted to the assigned Commission staff 

for review and approval. Distribution checks, on their face, or in the accompanying mailing will 

clearly indicate that the money is being distributed from an SEC Fair Fund. Checks that are not 



negotiated within the stale date shall be voided. Electronic credits will be made only to cash 

equivalent accounts (e.g., checking or savings accounts). 

11. Implementation of the Plan. The Fair Fund distribution to the Affected Mutual 

Funds will be implemented by the Financial Management Service, United States Department of 

the Treasury ("FMS"), which will issue checks or electronically transfer funds to the Affected 

Mutual Funds pursuant to the procedures contained in the Distribution Plan. The Commission's 

Order previously authorized payment to the Affected Mutual Funds (whose identities were all 

known at the time). It is anticipated that the order issued by the Commission approving the 

Distribution Plan will include a provision authorizing disbursement of the Fair Fund by the 

Administrator. The Fair Fund disbursements will be made as follows: 

a. FMS will provide the Administrator with its proprietary software for the 

submission, in "Agency Input Format," of the information necessary to issue checks or 

electronically transfer funds through the Automated Clearing House ("ACH"). 

b. The Administrator will compile the information into an electronic file in 

the Agency Input Format and submit this electronic file to the assigned Commission 

staff when, in the Administrator's judgment, he has obtained the information necessary 

to make disbursements to a substantial number of the Affected Mutual Funds; provided, 

however, that the initial distribution shall be made no later than 90 days following 

approval of the Distribution Plan. 

c. The list of Affected Mutual Funds and respective Fund Distribution 

Amounts in the electronic file will be validated to Commission staff at the Plan 

Administrator's direction. The validation will state that the electronic file was 



compiled in accordance with the Distribution Plan and provides all the information 

necessary for FMS to make disbursement by check or ACH. 

d. The Commission, through its Office of Financial Management, will 

transmit the electronic file to FMS for the transfer of funds. Within 48 hours of receipt 

by FMS, checks will be mailed and/or funds will be transferred by the ACH. 

The Administrator will repeat this process as many times as necessary to complete distribution of 

the Fair Fund. 

12. Returned ChecksIElectronic Transfer Procedures. FMS will notify the 

Commission, which in turn will notify the Administrator, of any returned items due to non- 

delivery, insufficient addresses, andlor other deficiencies. The Administrator shall be 

responsible for researching and reconciling all errors that result in non-delivery and shall submit 

supplemental electronic files for payment of the returned items, as appropriate. 

13. Secondary Distribution. Upon exhaustion of all procedures to identify and locate 

the Affected Mutual Funds and to reconcile all errors that result in non-delivery, if any portion of 

the Fair Fund remains undisbursed (whether because an Affected Mutual Fund has failed to 

supply identifying information to the Administrator, because the Administrator has been unable 

to locate an Affected Mutual Fund, because an Affected Mutual Fund or its successor no longer 

exists, because a check becomes stale, or for some other reason), the Administrator may make a 

secondary distribution of the remaining funds. Such a secondary distribution shall be on a pro 

rata basis to each Affected Mutual Fund that previously received a distribution. The 

Administrator shall make a secondary distribution only if, in the Administrator's judgment, the 

amount of the remaining funds is sufficient to warrant the additional administrative cost of a 

secondary distribution. 



14. Termination of the Distribution Plan. The Administrator shall declare the 

implementation of the Distribution Plan complete the sooner of: (1) one year after the date of 

issuance of the last check, or (2) confirmation of negotiation of all outstanding checks (provided 

that all other requirements of this Distribution Plan have been met). 

15. Costs of Administering Funds. Respondents will pay all fees and costs associated 

with administration of the Distribution Plan, including but not limited to any tax compliance fees 

and costs incurred by the Fair Fund and the Administrator's fees. 

16. Taxes. The Commission has appointed Damasco & Associates as the Tax 

Administrator ("Tax Administrator") of the Fair Fund. The Administrator will cooperate with 

the Tax Administrator in providing information necessary to accomplish the income tax 

compliance, ruling and advice work assigned to the Tax Administrator by the Commission 

during and after implementation of the Fair Fund. The Administrator shall withhold from 

distributions to the Affected Mutual Funds an amount sufficient to satisfy any tax liability. The 

Tax Administrator shall be compensated by Respondents. The Administrator and BPD shall be 

authorized to provide account information to the Tax Administrator. 

1'7. Amendment. The Distribution Plan may be amended upon the motion of 

Respondents, the Administrator or upon the Commission's own motion. The staff of the 

Commission may extend any deadline contained in the Distribution Plan for good cause shown. 

Notice of Proposed Fair Fund Distribution Plan 

18. In accordance with Rule 1103, notice of the Distribution Plan shall be published 

in the SEC Docket and on the Commission's website. Any person or entity wishing to comment 

on the Distribution Plan must do so in writing by submitting their comments to the Commission 

within thirty days of the publication date of the Distribution Plan: (a) via first class mail to the 



Office of the Secretary, United States Securities and Exchange Commission, 100 F Street, N.E., 

Washington, DC 20549- 1090; (b) by using the Commission's Internet comment form 

(httl~://www.sec.~jov/litigation/adn~in.shttnl);or (c) by sending an e-mail to 

comments@,sec.~ov. Please include the appropriate Administrative Proceeding File Number on 

the subject line. 

Submitted on: By: 

Respondents 

mailto:comments@,sec.~ov