Bear Stearns Faces SEC Action In Mutual Fund Trading Crackdown

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

21 June 2004

Releasing its second quarter earnings report on Wednesday, leading US securities firm, Bear Stearns revealed that it may face civil charges by the Securities and Exchange Commission (SEC) over allegations that it facilitated improper mutual fund trading practices by clients of several of its units.

In its earnings report, Bear announced that:

"In relation to an ongoing investigation by the Securities and Exchange Commission (SEC) into mutual fund trading practices, Bear, Stearns & Co. Inc. and Bear, Stearns Securities Corp. have received a notice that the staff of the SEC is considering recommending that the commission bring a civil injunctive action and/or issue an administrative cease and desist order against them."

"Such action could result in, among other things, disgorgement, civil monetary penalties, and/or other remedial sanctions. Bear Stearns is cooperating fully with the SEC in connection with this matter."

According to reports, the charges in question are likely to relate to conduct by staff in the firm's securities clearing, prime brokerage, and private client businesses. Bear has already fired three members of staff in its clearing unit, and last fall fired four brokers and two assistants at its private client operation.

According to the Wall Street Journal, in a letter to employees sent on Wednesday, chief executive James Cayne announced that:

"I cannot stress enough how seriously we take these issues. Where we found instances of behaviour that should not have occurred, we have taken appropriate action."

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