FleetBoston Units Get SEC Wells Notice

Published January 16, 2004, 1:00 a.m. EST

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FleetBoston said on Thursday that two of its subsidiaries received a Wells notice from the SEC, indicating the agencys regional Boston office had recommendation enforcement action against the firm for shirking its fiduciary duties.

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Subsidiaries, Columbia Management Advisors and Columbia Funds Distributor, are accused of not revealing certain fund share trading activity arrangements in their prospectuses, the firm said.

While reporting its fourth quarter financial results, the firm said that it believes the allegations relate to a "limited number" of trading agreements that played out between 1998 and 2003. "The majority of trades made pursuant to these arrangements were made by three entities and occurred in one international and two domestic funds. None of these arrangements exist today."

The development is unlikely to affect the firms intended merger with Bank of America, announced in late October. At the time of the deal, there was speculation that BofAs troubled Nations Funds would benefit from being merged and rebranded into the Columbia family, which has an extremely strong presence in the Northeast.

Industry watchers still think that is a viable option for the firm. Russ Kinnel, director of fund analysis for Morningstar doesnt see the recent announcement changing BofAs plans since the Nations brand is already tainted.

"There is consideration now that the Nations Funds be branded away," said Jeff Keil, vice president of Lippers Global Fiduciary Review. "I think the Columbia brand is still pretty strong," Keil said. "This news shouldnt dilute the Columbia name at all, but it depends on how egregious the activities were."