Banc of America unit paying $6M in SEC settlement
WASHINGTON—Banc of America Investment Services Inc. is paying about $6 million in fines and restitution to settle federal regulators' charges of failing to tell customers that it favored two of its own mutual funds in selecting certain investments.
The actions by Banc of America Investment from July 2002 through December 2004 improperly put its own financial interests ahead of those of its customers, the Securities and Exchange Commission said Thursday in announcing the settlement.
In addition, the SEC charged Columbia Management Advisors LLC, the successor to Banc of America's investment management firm, with aiding and abetting the alleged violations. Columbia agreed to pay around $3.6 million in fines and restitution.
The money the firms are paying will go to compensate affected customers.
Banc of America Investment Services, which is a subsidiary of Charlotte, N.C.-based Bank of America Corp., also agreed to review its methods for selecting and recommending mutual funds to customers and the adequacy of its disclosures in that area.
"Policies, procedures and processes are now in place that are reasonably designed to prevent this from occurring again," Robyn Tice, a Bank of America spokeswoman, said in an e-mailed statement.
The SEC said Banc of America Investment failed to disclose to customers that it favored two affiliated funds in selecting investments for so-called mutual fund "wrap" fee accounts, in which customers pay a fee for advice and other services that is based on the amount of their assets in the accounts. The firm made "material misrepresentations and omissions" to clients who had given it discretion to select mutual funds for them, the SEC said in its administrative order.
"By using a method to select funds that was at odds with information it provided to clients, (Banc of America Investment) violated its duty of loyalty to its clients," SEC Enforcement Director Linda Thomsen said in a statement.
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