Credit Suisse Income Fund: Breach of Moral Obligation

Conclusion: While Credit Suisse Asset Management Income Fund (CIK) may, or may not, be in breach of Regulation FD (Fair Disclosure) in the manner it which it disseminated information regarding its most recent monthly distribution reduction, it is clearly in breach of its moral obligation to provide its own retail investors, on its own website, with the same disclosure timing it provided major data services.

Retail Investors’ Chopped Liver? While many of the data providers had already incorporated the news of a monthly dividend reduction from a monthly rate of $.03 per share to $.0265 into its database by Wednesday the 26th, it wasn’t until Friday the 28^th, that a press release appeared on its own website, dated August 21^st, disclosing the distribution reduction.

Under Rule 100 of Regulation FD, “As a whole, the regulation requires that when an issuer makes an intentional disclosure of material nonpublic information to a person covered by the regulation, it must do so in a manner that provides general public disclosure, rather than through a selective process.” (Italics and bold added.)

I believe a distribution reduction of almost 12% qualifies as material, non-public information, and I believe providing such information to institutional data providers prior to the release on CIK’s own website is selective disclosure.

While there are numerous safe harbors for disclosure of material, non-public disclosure, it is indefensible for such a disclosure not to be provided simultaneously on the company’s own website.

Complaint Filed: I have filed a complaint with the SEC enforcement division to investigate CIK’s disclosure process and whether it may be in violation of Regulation FD.

Disclosure: In an article posted August 26^th, on Seeking Alpha, I highlighted CIK as one of the CEFs that might provide investors with an attractive secure dividend based upon a screen. (Click here for the full report.) A timely disclosure by CIK, would have excluded them from the article. I apologize to any investors who may have spent time reviewing CIK based on that article.

Comments

[GlobalTrekker:]

Good for you, Joe. It was like pulling teeth getting the information from Credit Suisse directly, but given one of the comments in your previous article, pull is what we did, and they gave us the information over the phone on about the 25th. And, yes, Credit Suisse *does* think we are chopped liver. Actually, I feel that most of the fund companies do, and they are often incensed when you try to cut through their layers of subterfuge and talk to a person directly involved. Many are offended that you are taking up their time, even if you hold a major position. You'll also notice how more and more fund managers are only taking written questions that they select on their conference calls. All the more reason one has to be vigilant about their management fees and the funds in general.

Aug 30 10:56 AM

[David Van K...:]

I second the "good for you" comment.

IMO, serious dividend/income investors can do much better building their own portfolio of the best dividend-paying, dividend-raising stocks rather than buying funds or ETFs for that purpose. Reason: The funds and ETFs seem to be slow to jettison stocks whose dividends are in peril, and thus get stuck holding stocks whose dividends get slashed. An attentive individual investor can usually see such dividend cuts coming, and can get out of the stock before the cut.

Aug 30 02:36 PM

[Joe Eqcome:]

To All

For those of us critical of the SEC and its enforcement prowess, I am pleased to report to you that I've been contacted by a SEC lawyer regarding my submission of this complaint.

While these investigations are conducted in a non-public manner, so we'll never be able to know if there is any follow up until an official action, getting a response back that's more than an electronically "thank you for your interest" is encouraging.

Whether this is just better public relations on the part of the SEC, we have to wait to see.

Joe Eqcome

Sep 01 12:53 PM

[User 407579:]

Joe-- Good Work. Keep us informed.

Sep 03 09:30 AM

[Dar:]

Joe -- Good on you. This isn't the first time CS has been delinquent in their publishing information on their web site. Some time ago I complained directly to them about not posting NAV in a timely manner (it wasn't updated for over a week) and threatened an SEC complaint. I received a call from them informing me they would be keeping the web site up to date moving forward and they did.

I should not have to remind them of their obligations but at least they responded.

Dar Busa

Sep 08 12:59 PM