- The Washington Times - Monday, March 15, 2004


Bank of America and FleetBoston Financial have agreed to pay a total of $515 million to resolve charges of improper mutual-fund trading and to reduce fees investors pay by $160 million in the biggest fund-scandal settlement to date, federal and New York state authorities said yesterday.

Eight members of the board of directors of Nations Funds, Bank of America’s group of mutual funds, also will be required to resign their positions within a year for their purported role in allowing the trading violations — the first sanction of its kind in what has become an industrywide investigation.

“These directors clearly failed to protect the interest of investors,” said New York Attorney General Eliot Spitzer, who brought the first charges in the scandal that has rapidly enveloped the $7 trillion fund industry. “They acknowledged the problem of market timing, but then allowed a favored client to engage in that harmful practice. The departure of these board members should sound an alarm for all those who serve in similar capacities.”

Under the tentative agreement, which must be approved by the Securities and Exchange Commission, Bank of America would pay $125 million in civil fines and $250 million in restitution to investors. FleetBoston would pay $70 million in civil fines and an additional $70 million in restitution.

In addition, the two financial titans — which plan to merge — agreed to make certain changes in their mutual fund operations, including the board overhaul. By year’s end, Bank of America will have to be completely out of the securities clearing business, which involves executing transactions for other parties.

“The $375 million that Bank of America has agreed to pay and the significant reforms that it has agreed to implement reflect the seriousness of the misconduct in this matter,” said SEC Enforcement Director Stephen Cutler. “We will continue to investigate that misconduct in an effort to hold all responsible parties accountable.”

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