MARKET SAVVY : Savvy Confidential: A Briefing for Investors : Morgan Unit Settles Disclosure Charge

Morgan Stanley Dean Witter & Co.’s Van Kampen Investment Advisory and its former chief investment officer agreed Wednesday to pay $125,000 to settle charges that they failed to disclose the impact of hot initial public offerings on a mutual fund’s performance.

The Securities and Exchange Commission alleged that Van Kampen, based in Oakbrook, Ill., and Alan Sachtleben, the company’s former chief investment officer, published misleading advertisements about the Van Kampen Growth fund’s 1996 performance.

“This enforcement action--the first of its kind--demonstrates that it is wrong to raise shareholder expectations of future gains by advertising spectacular past returns when it is highly unlikely those returns can be sustained as the fund grows in size,” SEC Enforcement Director Richard H. Walker said.

Van Kampen agreed to pay a $100,000 fine to resolve the case, and Sachtleben agreed to pay $25,000, the SEC said. The company and Sachtleben, who neither admitted nor denied guilt, could not immediately be reached for comment.

The SEC alleged that Van Kampen failed to disclose in its ads that more than half the growth fund’s 62% return during the period in question was attributable to investments in IPOs.

The fund has cooled off, though its performance remains respectable. As of Tuesday, it had returned 10.9% this year.