NEW YORK – Wall Street firm Bear Stearns Cos. Inc. (BSC) could face fines and other sanctions from the Securities and Exchange Commission (search) over the company's role in improper mutual fund trading, the company reported in a regulatory filing Wednesday.
In an update filed with the SEC, Bear Stearns said it has been the subject of an SEC investigation into mutual fund trading activity. A number of Wall Street firms and mutual fund companies have been heavily penalized in recent years by the SEC for improperly trading mutual funds after the markets close.
Bear Stearns has been in talks with the SEC on resolving the matter, but said in its filing that SEC investors have been authorized to bring an official action against the company. That action could lead to fines, disgorgement of past profits allegedly obtained through improper fund trading and remedial actions the company may be forced to undertake.
"The company believes it has strong defenses to the potential claims, and intends to continue to engage in discussions with the (SEC) regarding a possible resolution of this matter," Bear Stearns said in its filing.
The SEC has been investigating a division of Bear Stearns Securities Inc., a clearinghouse for stock and fund transactions.
In recent years, the entire mutual fund industry has been buffeted by market-timing scandals, in which funds allowed after-hours trading. By trading after the close of the markets, but before the day's results were updated in the mutual funds' share values, market-timers could minimize losses or maximize profits.
Previous Bear Stearns filings with the SEC and the National Association of Securities Dealers Inc. (search) showed that the investigation of the company was focused on market-timing issues.
A spokeswoman for Bear Stearns was not immediately available for comment.
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