SEC May Recommend Action Against Wachovia Subsidiary

September 28, 2004 ( - Wachovia Corp. the nation's fifth-largest bank, has admitted in a securities filing that the Securities and Exchange Commission (SEC) may recommend enforcement action against the bank's brokerage unit for improper trading in mutual funds.

In the disclosure filed Monday, Wachovia stated that the SEC may take action against Evergreen Investment Management Co. An employee of Evergreen and a broker supposedly made excessive trades on behalf of a client in Evergreen’s Mid Cap Growth fund between late 2000 and early 2003, according to allegations.

Wachovia was advised of possible action on July 28, when the SEC said it would be looking into that mutual fund trades made by the former Evergreen employee on behalf of an individual broker.  According to the SEC allegations, these trades were in excess of limitations set forth in a mutual fund prospectus (See SEC Considering Enforcement Action Against Evergreen ).

In a letter to shareholders posted on its Web site , Evergreen’s President and Chief Executive Officer, Dennis Ferro, noted that the SEC has focused on “…an arrangement pursuant to which a broker at one of EIMC’s affiliated broker-dealers had been authorized, apparently by an EIMC officer (no longer with EIMC), to engage in short-term trading, on behalf of a client, in Evergreen Mid Cap Growth Fund (formerly Evergreen Small Company Growth Fund and Evergreen Emerging Growth Fund) during the period December, 2000, through April, 2003, in excess of the limitations set forth in the Fund’s prospectus.” (See Evergreen Names Names ).

Wachovia has also had other regulatory problems as of late.  In May, Wachovia disclosed the SEC was investigating the mutual fund sales and distribution practices at Wachovia Securities LLC.  Specifically, the SEC was looking into revenue-sharing arrangements between Wachovia and various undisclosed investment companies (See   SEC Looking Into Wachovia’s Revenue-Sharing Practices).