The felony larceny and securities fraud charges against former broker Theodore Sihpol have forced Bank of America’s Nations Funds unit into a precarious spot in which losing investors is a distinct possibility, according to fund experts.

"I would have to make the assumption: ‘Better safe than sorry,’" Harold Evensky, a certified financial planner from the Florida firm Evensky, Brown & Katz told Reuters. "It’s not like there aren’t other funds."

With New York State Attorney General Eliot Spitzer’s promise that more charges are to follow against other Bank of America employees, Morningstar fund analysis director Russel Kinnel warned that Bank Of America had better make changes if it wants to keep any kind of grip on its client base. "When your brand is damaged, you don’t generally bounce right back," Kinnel said.

Kinnel contended that with Nations Funds having been a "mixed bag" in terms of recent performance, larger fund firms like Vanguard and Fidelity may make it tough on Bank of America by luring investors to their portfolios, ones not under criminal investigation.

Someone close to Bank of America, speaking on the condition of anonymity, told Reuters that Nations Funds has not yet been financially affected by Spitzer’s probe and subsequent charges.

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