Bank of America and FleetBoston Financial today settled with the SEC and New York Attorney General Eliot Spitzer over market-timing allegations.
Bank of America agreed to pay $250 million to its mutual fund shareholders who were hurt as a result of the market timing in some of its Nations Funds mutual funds. The balance of $125 million will be in the form of penalties for violations of securities laws. Bank of America also agreed to get out of the securities clearing business by the end of the year, to replace eight Nations Funds board members within a year and to undertake reforms that will enhance the independence of its mutual funds and strengthen their oversight.
FleetBoston Financial will pay $70 million in restitution and $70 million in penalties for its role in allowing late trading and market-timing arrangements, under an agreement with Mr. Spitzer's office and the SEC.
Separately, Mr. Spitzer announced that Bank of America and FleetBoston, which are poised to merge their operations as early as April 2, will reduce fees charged to investors by a combined $160 million over a five-year period.
FleetBoston Financial Chairman and CEO Chad Gifford said in a news statement: "We have worked closely with regulatory authorities to determine the facts on market-timing activity and to discipline those responsible. Any activity which disadvantaged customers is offensive, even though limited to a small number of individuals. Columbia mutual fund shareholders will be repaid by Fleet as part of the settlement for any damages incurred. The agreement announced today underscores our commitment to have the best practices in the industry to assure that our customers' interests are our top priority."
Bank of America Chairman and CEO Kenneth D. Lewis said in a news statement: "These agreements represent Bank of America's good-faith effort to resolve this matter and is in the best interests of our customers, associates and shareholders. We have consistently said that the actions of a few individuals and what occurred is not representative of the way Bank of America does business, and we have no tolerance for actions that violate our values. Throughout this process, we have cooperated fully with the investigating authorities."