State Street Research to Pay Fine for Allegedly Allowing Trading Abuses
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WASHINGTON — Regulators have fined State Street Research Investment Services $1 million for allegedly failing to prevent trading abuses in mutual funds by some customers of Prudential Securities, under a settlement announced Thursday.
The National Assn. of Securities Dealers, the brokerage industry’s self-policing arm, said State Street Research’s “inadequate supervisory systems” allowed the favored customers to improperly engage in market timing of its fund shares.
Market timing, or quick in-and-out trading to exploit price changes or market inefficiencies, figures in many of the cases brought by federal and state authorities in the widening investigations of the mutual fund industry. The practice is not illegal but violates the rules of most fund companies.
State Street Research, which distributes its mutual funds to brokerage firms for sale to their customers, also agreed in the settlement to pay back about $530,000 to the affected funds to compensate for losses attributed to the market timing.
Boston-based State Street Research, part of major insurance company MetLife Inc., neither admitted nor denied wrongdoing in the settlement.
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