Regulators, mutual fund company OK settlement

Friday, February 6, 2004

BOSTON -- The company credited with inventing the mutual fund 80 years ago was formally swept up in the improper fund trading scandal Thursday, as Massachusetts Financial Services agreed to relinquish $350 million in a deal that also forced out two top executives. Under the settlement reached with the Securities and Exchange Commission, MFS chief executive John Ballen and president and chief investment officer Kevin Parke were barred from certain types of jobs in the fund industry for three years. The men will also have to pay $300,000 each -- $250,000 in penalties and $50,000 in restitution -- out of their own pockets.

State regulators in New York and New Hampshire were also party to the settlement, which calls for MFS to pay $175 million in restitution to investors and $50 million in penalties. MFS will also lower fees by $125 million over the next five years.

MFS had no immediate comment on the settlement.

MFS is the latest mutual fund company to settle with regulators in the scandal that has swept the $7 trillion industry and resulted in investigations of dozens of fund companies.

It is the nation's No. 11 fund company, with about $140 billion under management, and operates what some consider the oldest mutual fund: the Massachusetts Investor Trust, introduced in 1924.

The settlement with MFS is smaller than the one reached in December with Alliance Capital Management, which included $600 million in fines, restitution and fee reductions, but the suspensions of such high-ranking officials will make this settlement among the most serious enforcement actions yet in the scandal. Top executives at such firms as Pilgrim Baxter and Putnam Investments have lost their jobs, but not directly at the insistence of the SEC.

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