The bank is establishing the restitution fund for Nations Funds shareholders who were harmed by Canary’s trading activities (See Spitzer Fund Abuse Probe Pumps Out More Subpoenas ), according to a news release. Additionally, restitution will be provided to shareholders of third-party mutual funds harmed by Canary’s activities, to the extent that those trades were processed at Bank of America.
Restitution payments headlined three steps the Charlotte, North Carolina-based bank said it plans to enact in response to of its ongoing inquiry into mutual fund practices, spurred by New York Attorney General Eliot Spitzer’s probe into Canary’s late trading” and other forms of market timing. Spitzer has alleged that Bank of America’s Nations Funds helped Canary trade funds after market hours, but at stale closing-time prices.
Following the inquiry of the New York state advocate, Bank of American also announced the launch of an independent review of the firm’s mutual fund policies and practices. Brought on to head up this task was Dale Frey, the retired president and chairman of the General Electric Investment Corporation. As a part of this review, Frey will make recommendations to ensure Bank of America’s mutual fund operations are conducted in the best interest of all of its customers.
The company also brought on former general counsel at State Street Corp., Maureen Scannell Bateman, to conduct a legal review of the mutual funds and Promontory Financial Group to review the technology, control, and compliance systems related to the mutual fund business.
Additionally, the firm announced plans to develop “new policies throughout its various business units to eliminate all lending, derivatives, brokerage services or any other services relating to mutual fund trading activity by clients known to Bank of America to engage in active mutual fund market timing not permitted by the targeted funds.”