AmSouth Bank and AmSouth Asset Management settled charges Tuesday by the Securities and Exchange Commission that they defrauded mutual funds by secretly using a portion of administrative fees paid by shareholders for marketing and other unrelated expenses.
Without denying or admitting the allegations, the two units, now part of Regions Financial Corp., will pay an $11.4 million penalty to be distributed to the funds, now run by Pioneer Investments, the SEC said.
The agency alleged that the units entered improper and undisclosed agreements with the fund administrator, Bisys Fund Services. The complaint states that Bisys rebated about $16 million of its $49 million administration fee for the AmSouth units to pay marketing fees, with the understanding that they would continue to recommend to their directors that Bisys remain as an administrator.
The units agreed to cease and desist from committing or causing any future violations of the Investment Advisers Act and Investment Company Act, the SEC said.
Neither Regions nor Pioneer nor the defense counsel in the case immediately returned calls for comment.