Giant payout in US funds scandal: Spitzer wins

[emad]

From: BBC News


Two major US banks have accepted penalties of $675m (£373m) to settle a scandal over improper stock trading practices ahead of their merger. It is the biggest pay-out yet won by regulators monitoring US mutual funds, in which at least half of US households have savings.
Bank of America and FleetBoston agreed to pay fines and cut their fees, but admitted no wrongdoing. The US market regulator and New York's attorney general unveiled the deal.

The settlement is another victory for Eliot Spitzer, New York's attorney general, who launched a crusade in mid-2003 to weed out trading practices that can damage the interests of small investors. The US Securities and Exchange Commission (SEC) opened investigations into investment firms targeted by Mr Spitzer, who took his own high profile campaign to Congress.

Other financial institutions that have settled with the SEC include Alliance Capital for $250m; Morgan Stanley for $50m; and Putnam Investments, the fifth biggest US mutual fund. Bank of America and FleetBoston are planning a $47bn merger. The settlement clears away an embarrassment ahead of shareholder meetings on Wednesday to clinch their union. They agreed to pay a combined total of $515m in fines, and to cut fees by $160m over five years. Eight directors of Bank of America's Nations Funds are to step down from its board within a year for ignoring improper trading by a client, Canary Capital Partners.

Mr Spitzer said the eight had "clearly failed to protect the interest of investors", adding that "the departure of these board members should sound an alarm for all those who serve in similar capacities". At least 30 people had already lost their jobs on Wall Street as part of the crackdown in the mutual fund industry before these departures.
Mr Spitzer, the SEC and a host of state-level regulators are trying to track down and weed out market-timing, the practice of short-term trading in mutual fund shares by industry insiders. Although not illegal, market-timing violates the sector's codes of practice and the pledges given to savers by most mutual funds.

From: http://news.bbc.co.uk/1/hi/business/3515070.stm

[keithyboy]

1. My problem is that no one will go to jail. Only Martha.

After you win, what do you win?

[The Backlash Cometh]

4. Here's the big problem. The boys that got away with a fine can get

another similar job through the country club.

[pw]

6. And the fine is deductible

As long as there's no admission of wrongdoing (unless that law's been changed recently). So you and I are paying a good chunk of that $600 million.

[Yupster]

2. So what's wrong with market timing?

If someone wants to guess what days the market is going up and down and wants to place quick buy and sell orders with his own money, why is that a problem?

[ender]

3. you arent following this story...

its about "market timing", after hours. you know - as in illegaltrading activity. or, letting special clients cash out after market, after some particular disastarous news, or exceptionally good news was released.

it is very unfair, and very illegal. there is harm, and there is a foul here.

[teryang]

5. Has anyone noticed?

Investment advisors and mutual fund presidents attacking Spitzer, attacking democratic candidates, pushing chimps bankrupt economic policies.

They must be stupid. I'm going to roll over my funds to a company and get investment advice that aren't pushing this assinine self interested political crap. Don't they know that they are offending a large segment of their investors?

Of course the self dealing and illegal trading speaks for itself.

Looks like the PPT was at work early this morning. Nothing has changed in the marketplace. Look out below!