Bear Stearns settles SEC fraud charges


The investment bank is charged with securities fraud for facilitating unlawful late trading and deceptive market timing of mutual funds by its customers and customers of its introducing brokers.

The SEC asserted that from 1999 through September 2003, Bear Stearns provided technology, advice and deceptive devices that enabled its market timing customers and introducing brokers to late trade and to evade detection by mutual funds.

The bank is to pay $250 million, consisting of $160 million in disgorgement and a $90 million penalty. The money will be paid into a Fair Fund to be distributed as compensation to investors.

The SEC order also requires Bear Stearns to undertake significant reforms to improve its compliance structure. Simultaneously, NYSE Regulation censured Bear Stearns, and imposed a fine, which was satisfied by the payment of the $250 million pursuant to the SEC's order.

Linda Chatman Thomsen, SEC enforcement division director, said: "This settlement will not only deprive Bear Stearns of the gains it reaped by its conduct, but also require Bear Stearns to put in place procedures to prevent similar misconduct from recurring.".

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