PHILADELPHIA, Aug. 31 /PRNewswire-FirstCall/ -- Delaware Service Company, Inc. (DSC), an accounting and administrative service provider to several funds, today announced settlement of a matter resulting from an investigation by the U.S. Securities and Exchange Commission (SEC) which found that DSC violated Sections 19(a) and 34(b) of the Investment Company Act of 1940. Without admitting or denying the validity of the SEC's findings, DSC has agreed to remedial sanctions, including the payment of a $425,000 penalty to the SEC.
Section 19(a) of the 1940 Act prohibits an investment company from paying any dividend or making any distribution in the nature of a dividend payment, wholly or partly, from any source other than net income unless such payment is accompanied by a written statement/notice which adequately discloses the source of such payment. In an order, the SEC found that DSC failed to send the required Section 19(a) notices on behalf of three closed-end investment companies that made distributions to shareholders pursuant to managed distribution policies between January 2000 and March 2004. The SEC's order also found that DSC did provide such fund shareholders with Form 1099-DIV statements disclosing the nature of the distributions described above on a tax basis at the end of the calendar year. The three investment companies referenced above were Delaware Investments Dividend and Income Fund, Inc. , Delaware Investments Global Dividend and Income Fund, Inc. , and Lincoln National Convertible Securities Fund, Inc. Lincoln National Convertible Securities Fund, Inc. was merged out of existence into a separate investment company in June 2005. The SEC order also found that DSC violated Section 34(b) of the 1940 Act because DSC represented in an SEC exemptive order application that it was sending out the required Section 19(a) notices on behalf of DDF and DGF.
DSC takes the above matters very seriously and has cooperated with the SEC to respond appropriately to the SEC's requests and findings. The SEC's order states that the SEC considered certain remedial actions promptly undertaken by DSC and its cooperation with SEC staff in this matter. The SEC order also recognizes that DSC began making the required Section 19(a) notices, as necessary, to shareholders of the three funds listed above in April 2004. Lastly, the entire amount of the penalty imposed by the SEC will be paid by DSC and not by the funds listed above or their shareholders.
