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News February 14, 2005 Issue

Bank of America Settlement Finally Final

The SEC and Bank of America have finalized the terms of the settlement agreed to in principle almost a year ago. As expected, BofA agreed to settle the SECís market timing charges by paying $375 million ($250 million in disgorgement and $125 million in penalties) and exiting the clearing business.

This time, however, the SECís press release did not imply that a fundís manager could unilaterally dismiss its mutual fundsí board of directors, something that caused consternation when BofAís agreement in principle was announced in March 2004. At that time, some in the investment management industry took note of a sentence in the SECís press release that seemed to indicate that BofA would unilaterally oust the directors of its Nation Funds.

The SEC was a bit more careful in its February 9 release: "The Nations Funds and the independent trustees also voluntarily undertook to implement certain election and retirement procedures that will result in the replacement of seven trustees by early 2005," it said. "The Governance Committee of the Board of Trustees of Nations Funds, comprised entirely of independent trustees, is responsible for making recommendations to the Board on issues related to the composition and operation of the Board, including nominating replacements for these trustees."