Bisys to Pay $21 Million to Settle Kickback Allegations
Bisys Group Inc., a provider of administrative services to investment firms, agreed to pay $21 million to settle charges by federal regulators that it helped mutual funds defraud investors through fee kickbacks.
Bisys, based in Roseland, N.J., secretly arranged to give back part of its fees to advisors of 27 funds in an effort to keep them as clients, the Securities and Exchange Commission said Tuesday. Bisys provided $230 million to the advisors, enabling them to improperly pay marketing and other expenses with investors’ money rather than their own, the SEC said.
“As a direct result of Bisys’ misconduct, mutual fund investors unknowingly paid millions of dollars for marketing their funds,” Randall Lee, director of the SEC’s regional office in Los Angeles, said in the statement.
The SEC investigation of the so-called side agreements is an offshoot of a crackdown by federal and state regulators on abusive mutual fund trading and marketing practices that has yielded more than $4.4 billion in penalties. Bisys is the first fund administrator to settle charges of helping funds improperly pay bills. The investigation is continuing, the SEC said.
Bisys neither admitted nor denied guilt in reaching the settlement, said Amy Conti, a company spokeswoman. Bisys cooperated with the SEC’s probe, which covered agreements in place from July 1999 to June 2004, she said.
Bisys disciplined or fired an undisclosed number of employees involved in the deals with fund advisors, according to a separate statement issued by the company. It also implemented new compliance policies and agreed to hire an independent consultant to review them.
The accord was announced after the close of regular New York Stock Exchange trading, where Bisys shares gained 4 cents to $11.37.
The company said Aug. 10 that it was considering options including a sale. The same day, it announced the resignation of Chief Executive Russell Fradin, who was named chairman and CEO of benefits consultant Hewitt Associates Inc.
