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Rating:Bear Stearns Settles With Regulators Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, March 16, 2006

Bear Stearns Settles With Regulators

by: Armie Margaret Lee

It's official: Bear Stearns will plunk down $250 million to settle regulatory allegations that it facilitated improper mutual fund trading practices.

The Securities and Exchange Commission and the New York Stock Exchange made this announcement on Thursday, two days after media reports surfaced that a settlement has been reached.

Of the settlement total, Bear Stearns will pay $160 million in disgorgement and a penalty of $90 million.

In a statement, the SEC said that from 1999 to September 2003, Bear, Stearns & Co. and Bear, Stearns & Securities Corp. provided technology, advice and deceptive devices that allowed its market timing customers and introducing brokers to engage in late trading and escape detection by mutual funds.

"Bear Stearns was the hub that connected the many spokes of market timing and late trading- hedge funds, brokers and the mutual funds," said Mark Schonfeld, director of the commissionís Northeast regional office.

Citing tape-recorded phone calls of Bear Stearns employees, Schonfeld said it was clear that Bear Stearns had engaged in activities that were fundamental to fund trading abuses.

"Bear Stearns made it possible for hedge funds and brokers to submit orders long after the 4:00 p.m. cut-off," he said. "Bear Stearns made it easier for the hedge funds and the brokers to engage in market timing, and harder for the mutual funds to detect and stop it."

Apart from the payment of $250 million, Bear Stearns was also ordered to retain an independent compliance consultant to undertake a review its policies in the areas of prime brokerage, correspondent clearing and mutual fund transactions. 

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