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MFS Agrees To $225 Million Settlement

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NU Online News Service, Feb. 5, 2004, 5:59 p.m. EST – Massachusetts Financial Services Company has agreed to pay $225 million to resolve mutual fund market-timing investigations.[@@]

MFS, a unit of Sun Life Financial Inc., Toronto, has negotiated a series of settlements with the U.S. Securities and Exchange Commission, New York State Attorney General Eliot Spitzer and New Hampshire securities regulators, according to Sun Life Financial.

John Ballen, the chief executive of MFS, and Kevin Parke, the president of the fund company, also have settled administrative proceedings with the SEC, Sun Life Financial says.

Regulators have accused MFS of including false and misleading information regarding market timing in MFS fund prospectuses, Sun Life Financial says.

“Under the terms of the settlements, MFS and the executives neither admit nor deny wrongdoing,” Sun Life Financial says.

The settlements include $175 million in compensation for fund shareholders along with $50 million in extra penalty payments for fund shareholders, Sun Life Financial says.

MFS also has agreed to a request by Spitzer’s office that it reduce fees on the funds it advises by about $25 million per year over the next 5 years.

In addition, MFS will be paying the New Hampshire securities regulators a $1 million administrative fine.

Ballen has agreed to accept a 9-month suspension from the SEC and pay $315,000 in compensation and penalties, and Parke has agreed to accept a 6-month suspension and pay $315,000 in compensation and penalties, Sun Life Financial says.

In related news, Sun Life Financial has named Robert Manning to take over as president, chief executive and chief investment officer of MFS. Manning has been the MFS chief fixed income officer since 2001.

Sun Life Financial says MFS and the SEC found evidence that outside parties placed illegal late trades in certain MFS funds, without MFS’ knowledge and in violation of MFS’ contracts with the broker-dealers that placed the trades.

“MFS intends to vigorously pursue restitution from the parties responsible for such illegal late trading,” Sun Life Financial says. “Neither the SEC nor the state complaints alleged that there is any evidence that any MFS employee engaged in any criminal activity, or was knowingly involved in late trading. Nor did the complaints allege that MFS accepted so-called ‘sticky assets,’ or assets invested in certain funds in exchange for the right to market time other funds.”

In the past, MFS has taken a number of steps to guard against market timing and late trading.

Now, MFS also has agreed to hire an independent compliance consultant, create an internal compliance controls committee, establish an ethics oversight committee and hire a corporate ombudsman who will listen to MFS employees who have concerns about company business practices.


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