11.20.2003 The SEC
filed a civil injunctive action in the United States District Court for the Eastern District of Pennsylvania against Gary L. Pilgrim, of Malvern, PA, Harold J. Baxter
, of Berwyn, PA and Pilgrim Baxter & Associates, Ltd.
(Pilgrim Baxter), a registered investment adviser headquartered in Wayne, PA, charging them with fraud and breach of fiduciary duty in connection with market timing of the PBHG Funds
Baxter was the CEO and Chairman of Pilgrim Baxter & Associates, and the Chairman and trustee of the PBHG Funds and the PBHG Insurance Series Fund.
In March 2000, with the approval of both Pilgrim and Baxter, Appalachian began market timing several PBHG funds including the PBHG Growth Fund, whose portfolio was managed by Pilgrim.
Neither Pilgrim nor Baxter
disclosed to the Board of Pilgrim Baxter & Associates
, the Board of Trustees of the funds, or fund shareholders, that Pilgrim had an extensive financial interest in Appalachian and that Appalachian had been permitted to implement its trading strategy in PBHG funds.
In addition, the SEC alleges that Baxter provided non-public PBHG Fund portfolio information to a close friend in the brokerage business, who was president of Wall Street Discount Corporation, a registered broker-dealer.