This matter concerns multiple violations of Section 206(2) of the Advisers Act and Sections 15(c) and 34(b) of the Investment Company Act by NYLIM in connection with a mutual fund it advised, the MainStay Equity Index Fund (“Equity Index Fund”), during the period from early 2002 through June 30, 2004 (the “relevant period”). The Equity Index Fund is an open-end investment company that seeks to replicate the movements of the S&P 500 index before expenses. During the relevant period, the disinterested members of the Board of Trustees and the Board of Trustees of The MainStay Funds, approved the renewal of three investment advisory contracts between NYLIM and the Equity Index Fund. For each contract renewal process, commonly known as the “15(c) process,” the Board of Trustees received information showing that the management fees NYLIM charged to the Equity Index Fund were among the highest of the Equity Index Fund’s peer-group of mutual funds. NYLIM urged the Board of Trustees to consider the “Guarantee” feature of the Equity Index Fund in evaluating the management fees NYLIM proposed, but, in violation of Section 206(2) of the Advisers Act and Section 15(c) of the Investment Company Act, failed to provide the Board of Trustees information reasonably necessary to evaluate the cost of the Guarantee.2
Moreover, at the same time that NYLIM was claiming that the Guarantee should be considered to justify the Equity Index Fund’s management fees, it was filing with the Commission, in violation of Section 34(b) of the Investment Company Act, prospectuses, annual reports, and registration statements in which it misrepresented that there was “no charge” to the Equity Index Fund or its shareholders for the Guarantee.