What is a Fair Fund?

A Fair Fund is a fund established by the U.S. Securities and Exchange Commission (the "SEC") to help distribute disgorgements (returns of wrongful profits) and penalties to investors who were victims of a financial or securities fraud.

Fair funds were created by the Sarbanes-Oxley Act of 2002 to hold and properly distribute money that is recovered as a result of a successful SEC enforcement action.  The money paid into the Fair Fund comes as a result of the settlement of an SEC enforcement action.

The Claims Process

The Fair Fund typically will establish parameters to outline which investors can submit for a claim for a distribution from the Fair Fund.

Investors eligible to submit a claim with the Fair Fund typically will complete and submit a claim form to the Fair Fund in order to receive a distribution.

These claims forms generally ask the investor for information about their investment in the subject SEC enforcement action, such as the date and amount of his or her investment.  There is no standard Fair Fund claim form as the claim form is tailored to the circumstances of each case.

Fair Funds normally impose deadlines on claim submission to ensure that investors submit their claims to the Fair Fund in a timely manner.

Distribution of Fair Fund Assets

Once the disgorgements and penalties are paid into the Fair Fund by the subject of the SEC enforcement action, a plan of distribution is filed to determine the amount and timing of the distributions.

Once the plan of distribution is approved, the assets of the Fair Fund will be distributed to investors who have submitted claims in accordance with the plan of distribution.  Following the final distribution, the Fair Fund will be dissolved and the Fair Fund considered closed.
 

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