The SEC announced a settlement with Massachusetts Financial Services Company -MFS - related to the company’s use of mutual fund assets – namely, brokerage commissions on mutual fund transactions – to pay for the marketing and distribution of mutual funds in the MFS Fund Complex. The Commission issued an order that found MFS failed to adequately disclose to the Boards of Trustees and to shareholders of the MFS Funds the specifics of its “shelf-space” arrangements with brokerage firms and the conflicts created by those arrangements. As part of the settlement, MFS agreed to a series of compliance reforms and to pay a penalty of $50 million, which will be distributed to the MFS Funds.
The Commission’s charges stem from an ongoing industry-wide investigation of mutual fund sales practices begun by the SEC in the Spring of 2003. That investigation previously led to a $50 million settlement with Morgan Stanley DW Inc. in November for that firm’s failure to adequately disclose to its customers its receipt of such shelf-space payments from mutual funds.
MFS agreed to settle this matter, without admitting or denying the Commission’s findings.