Bank One Settles Trading Probe

From Associated Press

Bank One Corp. agreed Tuesday, on the eve of its final day as an independent company, to settle regulators’ allegations that it allowed a hedge fund to make improper mutual fund trades.

The $50-million settlement, which consists of $10 million in restitution and $40 million in civil penalties, also calls for Bank One’s mutual fund unit, Banc One Investment Advisors, to cut the fees it charges investors by $8 million annually over five years.

The deal is the latest in a string of settlements regulators have reached with fund companies over charges that favored investors were permitted to engage in rapid-fire trading of fund shares in recent years, at the expense of average investors.

The settlement was announced by the Securities and Exchange Commission and New York Atty. Gen. Eliot Spitzer, which had jointly made the allegations of improper trading involving the bank’s fund unit.


Mark Beeson, former chief executive of the company’s One Group mutual funds, was ordered by the SEC to pay a penalty of $100,000 and barred from the fund industry for three years.

The SEC said Beeson and the Banc One unit violated federal securities laws by allowing hedge fund manager Edward J. Stern of Canary Capital Partners to engage in excessive short-term trading. Banc One also improperly provided him with confidential portfolio holdings.

The settlement came just before the acquisition of Bank One by J.P. Morgan Chase & Co. is set to be finalized Thursday.

Bank One was among the first fund managers linked to improper trading by Canary when Spitzer made public his fund trading probe in September.