Bank One To Settle With SEC Over Market Timing Activity

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

01 July 2004

Bank One Corp. on Tuesday reached a settlement agreement with the US Securities and Exchange Commission (SEC) over market timing allegations made against it.

According to the SEC, the bank's Banc One Investment Advisers (BOIA) unit has agreed to pay disgorgement of $10 million and a civil penalty of $40 million, and agreed to cut its fees by $40 million over the next five years.

Former One Group Mutual Funds Chief Executive, Mark Beeson agreed to a $100,000 fine and a 2 year ban from the mutual fund industry (with a 3 year bar from serving as a mutual fund officer, director, or investment adviser).

The Commission found that BOIA had violated federal securities laws by allowing excessive short-term trading in One Group funds by hedge-fund manager Edward J. Stern in the hope of attracting additional business, which created a conflict of interest because the trading increased BOIA’s advisory fees but was potentially harmful to One Group funds;

The regulator also accused the unit of failing to charge Stern redemption fees as required by One Group’s international fund prospectuses when other investors were charged the redemption fees, and of having no written procedures in place to prevent the non-public disclosure of One Group portfolio holdings, and improperly providing confidential portfolio holdings to Stern when other shareholders were not provided the same information.

Additionally, the SEC revealed that BOIA had caused One Group funds to participate in joint transactions (a BOIA affiliate loaned money to Stern for the purpose of market-timing), raising a conflict of interest.

Separately, the Commission also found that BOIA allowed excessive short-term trading in One Group funds by a Michigan market timer in violation of fund prospectuses and failed to collect required redemption fees from a Texas hedge fund.

Recommended