Bank One Expects ‘Enforcement Action’

From Bloomberg News —  Bank One Corp., the sixth-largest U.S. bank by assets, said Wednesday that it expected regulators to take an “enforcement action” stemming from their investigation of the company’s mutual fund trading practices.

The comments by David Kundert, head of the Chicago-based bank’s mutual fund group, were posted on the bank’s Web site. He also announced new policies that he said were intended to strengthen governance and control over the bank’s mutual funds.

Bank One last month replaced two executives in its money management unit amid a probe into improper trading privileges given to Canary Capital Partners’ hedge fund.

“We are continuing to cooperate with the investigations,” Kundert said Wednesday. “As expected, we have been told to anticipate enforcement action against Bank One’s mutual fund advisor.”

He said the bank was “optimistic” it could settle with regulators in several months.

Bank One intends to increase monitoring of trading in funds and expand training for employees on compliance, Kundert said.

Bank One was one of four firms named by New York Atty. Gen. Eliot Spitzer when he announced his probe of misconduct in the fund business Sept. 3. He said Bank One, along with Bank of America Corp., Strong Capital Management and Janus Capital Group Inc., allowed Canary to engage in trading tactics that hurt long-term fund shareholders.

Twenty companies, including Citigroup Inc., Merrill Lynch & Co., Charles Schwab Corp., Putnam Investments and Prudential Securities are either under investigation or have started their own probes into mutual fund trading practices.

Regulators, prosecutors and company executives have either charged, fired, suspended or forced the resignation of more than 50 individuals in the investigations.