BISYS Fund Services Settles With SEC

by Glen Shapiro, LawAndTax-News.com, New York

28 September 2006

The US Securities and Exchange Commission on Tuesday announced the institution of a settled enforcement action against mutual fund administrator BISYS Fund Services, Inc., finding that BISYS aided and abetted over two dozen mutual fund advisers in defrauding fund investors.

Between July 1999 and June 2004, BISYS entered into undisclosed side agreements with the advisers, which enabled the advisers improperly to use investors' mutual fund assets to pay for marketing expenses rather than paying for those expenses out of their own assets.

As part of its settlement, BISYS, a wholly-owned subsidiary of The BISYS Group, Inc., agreed to pay a total of $21.4 million, consisting of disgorgement of $9.7 million in ill-gotten gains, prejudgment interest of $1.7 million, and a $10 million civil penalty.

These monies will be placed in a distribution fund to be administered by the Commission for the benefit of the harmed mutual funds.

Linda Chatman Thomsen, Director of the SEC's Enforcement Division, announced that:

"Today's settlement demonstrates the Commission's commitment to rooting out fraud in all corners of the mutual fund industry. Secret arrangements such as those that BISYS entered into with over two dozen investment advisers have no place in the mutual fund industry."

BISYS cooperated with the Commission's investigation and took a number of remedial steps as outlined in the SEC's Order. However, BISYS consented to the issuance of the Order without admitting or denying the findings in the Order.

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