Bank of America Companies Paying $375 Million to Settle Charges of Improper Fund Trading

Bank of America Corp.'s mutual-fund adviser company, brokerage and clearing firm have agreed to pay a total of $375 million to settle regulators' charges of improper trading that hurt ordinary shareholders, authorities announced Wednesday. The $375 million payment, which includes $125 million in civil fines and $250 million in restitution, is the latest enforcement action over alleged mutual-fund trading abuses in an industrywide crackdown that began in September 2003.

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Bank of America Corp.’s mutual-fund adviser company, brokerage and clearing firm have agreed to pay a total of $375 million to settle regulators’ charges of improper trading that hurt ordinary shareholders, authorities announced Wednesday. The $375 million payment, which includes $125 million in civil fines and $250 million in restitution, is part of an agreement between the three Bank of America companies and the Securities and Exchange Commission, the office of New York Attorney General Eliot Spitzer, the Federal Reserve and the U.S. Office of the Comptroller of the Currency. It was the latest enforcement action over alleged mutual-fund trading abuses in an industrywide crackdown that began in September 2003. It comes in addition to a March 2004 settlement in which Bank of America and FleetBoston Financial, which Bank of America has since acquired, agreed to pay a total $515 million and cut fees investors pay by $160 million. That deal was to settle regulators’ charges of improper trading involving Nations Funds and was one of the biggest penalties in the industrywide scandal. The $375 million being paid in the new settlement by the nation’s third-largest bank will go to the affected mutual funds, which also include certain Nations Funds, and to shareholders. The companies are Banc of America Capital Management, BACAP Distributors and Banc of America Securities. The regulators said the companies allowed both market timing of fund shares, a type of rapid, in-and-out trading that is not illegal but is widely restricted by funds because it skims profits from long-term shareholders, and late trading of shares. Late trading is illegal and involves favored customers receiving the market-closing price for fund shares for orders placed after the stock market closes for the day at 4 p.m. Eastern time. The improper trading allegedly occurred between July 2000 and July 2003. “This settlement will help ensure compensation for victims and help protect against a recurrence of such misconduct,” Mark Schonfeld, director of the SEC’s Northeast regional office in New York, said in a statement. Charlotte, N.C.-based Bank of America neither admitted nor denied wrongdoing in agreeing to the settlement, in which it also was censured and ordered to take corrective actions to strengthen compliance with securities laws. Bank of America shares fell 45 cents to close at $46.44 in Wednesday trading on the New York Stock Exchange. Its shares are trading near their 52-week high of $47.47 reached in November. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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