The Securities and Exchange Commission has put Bear Stearns on notice of possible civil charges for improper mutual fund trades placed through several of its business subsidiaries, The Wall Street Journal reports.

Bear Stearns in its second-quarter business earnings report confirmed the SEC's intentions to make further inquiries about improper mutual fund trading. The allegations have turned Bear Stearns into the largest brokerage firm with ties to the wave of mutual fund scandals that began last September.
The SEC previously notified Bear Stearns of possible charges stemming from potentially improper conduct by employees in its securities clearing, prime-brokerage and private-client subsidiaries. Each subsidiary receives commissions for providing services to third-party customers. Following this notice, three employees in Bear Stearns' clearing unit and four brokers in the private-client group were terminated for activities relating to the current regulatory investigation.
New York Attorney General Eliot Spitzer began his own inquiry last into Bear Stearns' mutual fund trading activities and subsequently found a series of violations involving hedge funds.

Bear Chief Executive James Cayne said in an internal memo to employees that he believes further action by the SEC is imminent.

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