BISYS Fund Services may be all but history now with various servicing units having been parceled out to other acquiring firms. But troubles are still brewing among at least some of the 27 mutual fund clients that the firm had questionable distribution arrangements with dating back to the 1990s. And now, fund advisors are opening their wallets in an effort to make investors whole.
BISYS paid $21.4 million to settle with the Securities and Exchange Commission in September 2006 for having allegedly agreed to inflated contracts with mutual fund companies and then kicking back a substantial portion of the contract price to the fund companies that hired it. The funds would then use the money for marketing and other expenses, and in return, recommend BISYS to their fund boards, according to the SEC complaint. All told, the SEC said, BISYS paid $230 million in kickbacks out of investors' fund assets between 1999 and 2004.