Sun Life Says Its Fund Unit May Be Charged

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The Securities and Exchange Commission last week declined to comment on a statement by Sun Life Financial Inc., Toronto, that the agency may soon charge the companys mutual fund unit with “false and misleading statements” about its use of market timing.

The enforcement action against Massachusetts Financial Services Company involves allegedly untrue statements in MFS fund prospectuses, Sun Life says.

The SEC staff also will recommend the agency charge the company with breaching its fiduciary duty to investors, according to Sun Life.

The SEC notice contains no claims that any MFS employee was involved knowingly in either late trading or inappropriate personal trading in MFS funds, the company says.

Late trading occurs when investors are allowed to trade in funds after U.S. markets close at 4 p.m. EST. Investors buying after that time are supposed to pay the next days price. But the SEC charges some funds gave certain investors same-day pricing, in effect giving them inside information they could use to profit at the expense of other fund investors.

MFS, in Boston, “is cooperating fully with the SEC,” Sun Life adds.

Sun Life owns 93% of MFS, the 11th largest mutual fund company in the U.S. MFS is also one of the top 10 providers of mutual funds sold through banks, notes Kenneth Kehrer, head of a Princeton, N.J., financial research firm.

A spokesman for the New York Attorney General Eliot Spitzers office declined to comment on whether it plans to join in the SEC action. A report Wednesday in the Toronto newspaper, the Globe & Mail, said the attorney general has asked MFS to provide information about allegedly illegal trading. The newspaper cited unidentified sources.

The attorney general has allied with the SEC in recent enforcement actions against a number of mutual fund providers, including Putnam Investments, Boston.

MFS funds under investigation by the SEC are MFS Emerging Growth; Massachusetts Investors Trust; Massachusetts Investors Growth Stock Fund; MFS Research Fund; MFS Total Return Fund; MFS Government Securities; and MFS Bond Fund.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 12, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.