Nations Shows Two Similarly Scandal Tainted Firms the Door

January 8, 2004 ( - In an ironic twist on the fallout coming from the ongoing fund trading scandal, a tainted mutual fund firm has sacked two other similarly tainted firms as sub-advisers.

Nations Funds, Bank of America Corporation’s fund family, said in a regulatory filing that the board of the $775-million Nations International Equity Fund terminated Putnam Investment Management and Invesco Global Asset Management as sub-advisers, Dow Jones reported. Bank of America’s Marsico Capital Management will remain as one of the fund’s sub-advisers.

In addition to being dissatisfied with the two firms’ investment performance, the board said it “also took into account the recently announced regulatory developments involving Putnam and Invesco affiliates and, in the case of Putnam, recent personnel departures.”

The irony is that all three firms – Bank of America, Putnam, and Invesco – all face allegations from regulators that they allowed chosen investors to conduct improper trading in their funds. Civil charges have been filed against Putnam and Invesco, as well as current or former employees of those firms.

While Nations has not been charged with any wrongdoing, it was one of the first fund companies implicated in the scandal that erupted when New York Attorney General Eliot Spitzer uncovered preferential market-timing arrangements between the hedge fund Canary Capital Partners and a number of fund operations, including Nations (See  Spitzer Fund Abuse Probe Pumps Out More Subpoenas ).

According to the attorney general’s  September complaint against Canary, which resulted in a $40 million settlement with the hedge fund, Nations International Equity was one of the funds Nations gave Canary the green light to market time.