The Securities and Exchange Commission has apparently been investigating how transfer agents collect fees and disclose them. The probe has caught up Mellon Investor Services, it was revealed Thursday.
Mellon Investor Services
is the transfer agent subsidiary of Mellon Financial Corporation.
The banking firm disclosed in an 8-k filing
with the SEC on Thursday that the SEC's Philadelphia District Office sent a Wells Notice to Mellon Investor Services and that it intends to bring a civil injunctive action against MIS for violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.
The SEC staff uses Wells Notice to provide targets of possible action an opportunity to respond formally before the staff makes a final determination whether to recommend that the SEC initiate an action.
The staff informed Mellon Investor Services that its recommendation relates to the transfer agent's disclosure practices to its issuer clients during the period 2001 through late 2004 concerning the receipt of fees from a search firm that performs in-depth searches for "lost" shareholders.
Mellon Investors Services received approximately $5 million in fees during that period.
Mellon officials said they believe that the SEC staff has been investigating related practices at other transfer agents and that they have been cooperating fully with the SEC staff in its investigation.
Mellon added that it intends to make a submission explaining why it believes that its conduct was lawful.
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