Bank of America Corp. has agreed to pay $375 million to settle charges of late trading and market timing actions in some mutual funds, the Securities and Exchange Commission said Wednesday.
The settlement includes $125 million in penalties and $250 million in restitution, which will be distributed to the mutual funds and their shareholders who were impacted by the actions.
The SEC also censured Bank of America Capital Management, Banc of America Securities and another division and will require them to take remedial actions to comply with federal securities laws.
Market timing is a technique involving short-term trading of mutual fund shares, which can have a detrimental effect on long-term holders, such as retirees. The practice isn’t illegal, but the SEC and state regulators have brought civil charges against mutual fund companies for allowing short-term trading when the language in a fund’s prospectus suggested such trading wasn’t permitted.
Last week, Secretary of the Commonwealth of Massachusetts William Galvin charged St. Louis-based A.G. Edwards (NYSE: AGE) with failing to stop a market-timing scheme at one of its branches. The scheme involved A.G. Edwards’ representatives who took part in an illegal market-timing scheme for two off-shore hedge fund customers. The complaint charges those responsible to supervise the representatives with failing to respond to and look into the problem.