Bank of America and FleetBoston last night agreed to pay $675m for allowing illegal trades in mutual funds in the largest settlement of its kind.
The two banks, which are in the process of merging, were accused of allowing hedge fund traders to make rapid-fire trades at mutual funds - a practice known as market timing - that shortchanged other investors.
New York state Attorney General Eliot Spitzer and the Securities and Exchange Commission announced the settlement, the largest of four such agreements in the probe into the seven trillion dollar mutual fund industry.
Bank of America will pay $250m in restitution and $125m in penalties. Fleet will pay $70m in restitution and $70m in penalties.
The two banks also agreed to cut fees by $160m over a five-year period.
