Massachusetts Financial Services Co. has reached a tentative agreement with federal regulators and the New York Attorney General to settle charges of improper trading in shares of its mutual funds, the Wall Street Journal said on Tuesday.
Citing people familiar with the matter, the paper said MFS, a Boston-based unit of Sun Life Financial Services of Canada Inc., has tentatively agreed to pay $225 million in penalties and cut its management fees by $125 million.
This would result in the second-largest penalty in the mutual fund investigations of the past four months.
Under the terms of the tentative settlement, MFS would pay $175 million in disgorgement and $50 million in fines, according to people familiar with the talks, the paper said.
The fee reductions, totaling $25 million annually over five years, would be part of MFS's agreement with New York Attorney General Eliot Spitzer's office but not the Securities and Exchange Commission, it said.
MFS is also expected to agree to changes in the way the firm oversees its funds and to provide greater information about the fees it charges investors, the paper said.
The company and the SEC could not immediately be reached for comment.
The MFS probe is focused on at least 11 funds that may have been used by market timers, a source said.
For several months, authorities have been probing market timing of mutual funds, which involves buying and selling of fund shares in ways that exploit stale price data and cut into returns of other investors.
Regulators have also probed late trading, an illegal practice in which shares are traded after markets close, at pre-close prices.