FleetBoston Financial has begun to feel ripple effects from the civil fraud charges filed by regulators last week, including a review by New York State officials of the implications for investors in the 529 college savings program that Fleet's Columbia Asset Management unit began managing in January.
Andrea Feirstein, a New York-based independent 529 plan consultant who advised the state on its switch to plan administrators including Columbia, said that New York was able to take account of the mutual fund trading scandals before completing its contract with Columbia. Some earlier state 529 contracts never contemplated a need to "fire" a plan administrator, she said, and some states have been stuck the past six months with managers that were battling through charges and settlement negotiations.
"Should the [federal and state] allegations [against Columbia] bear out, I think New York, having the advantage of recently negotiated its contract, should be able to protect itself," Feirstein said. "I think this will set a new standard going forward."
Columbia, which began selling the New York 529 plan through advisers in January, said it has acquired 2,895 accounts with $20.7 million of assets. It was chosen last July, along with Vanguard, to succeed TIAA-CREF as the manager of the state's 529 college savings program. New York has the largest state program, with $2.5 billion of assets under management.
Fleet values its relationship with New York, Charles Salmans, a Fleet spokesman said, and is in "close communication with them on this matter."