BofA, Fleet Near Settlement With SEC, Spitzer

March 15, 2004 (PLANSPONSOR.com) - Bank of America Corp and FleetBoston Financial Corp have reached settlement agreements with the Securities and Exchange Commission (SEC) related to their roles in the market timing and late trading of mutual funds, the Wall Street Journal is reporting.

Per the terms of the SEC settlement, which could be announced as early as today, Bank of America will agree to pay $375 million in both fines and disgorgement to investors and FleetBoston Financial will pay $140 million in fines and disgorgement.  In addition to the monetary payouts, t he financial institutions agreed to certain reforms as part of the agreement.   The settlement was reached without the admission of any wrongdoing on the part of Bank of America or Fleet, according to the Journal report.

The proposed settlement reached between regulators and the Charlotte, North Carolina-based Bank is the largest to emerge thus far out of the market timing and late trading imbroglio.   Other big-ticket settlements have included Alliance Capital Management ($250 million), and Massachusetts Financial Services ($225 million) (See  Alliance, Regulators Reach Settlement ,   MFS Scandal Settlement Finalized ).

With the announcement of a settlement comes the conclusion of months of investigation by both the SEC and New York Attorney General Eliot Sptizer into the extent of Bank of America’s involvement with Canary Capital’s market-timing and late-trading arrangements (See  Spitzer Fund Abuse Probe Pumps Out More Subpoenas ).   The Journal is also reporting the nearing of a deal between the two institutions and Sptizer’s office, which would also include a reduction in mutual fund fees if past settlements provide any guidance.

Spitzer took an especially keen interest in the Bank of American case because of how high Spitzer contends the scandal went, all the way up to the head of the bank’s asset management unit Richard Demartini.   Even though the scandal touched off a wave of employee bloodletting at Bank of America, Demartini was spared the chopping block, electing to step down after the firm completed its $47-billion merger with Fleet Boston Financial Corp.  That deal is expected to close during the first half of this year (See  BoA’s DeMartini to Step Down After Fleet Merger ).

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