The Securities and Exchange Commission is investigating whether 27 mutual fund companies accepted millions of dollars worth of kickbacks from fund administrators looking to secure their business, The Wall Street Journal reports.

The probe is a result of the $21.4 million settlement the SEC reached with BISYS Fund Services last month. Although the company neither admitted to nor denied the charges, the SEC said it paid $230 million in kickbacks between July 1999 and June 2004.

So far, the SEC has sent letters to a number of the 27 companies asking them about their relationship with BISYS, sources told The Journal. The SEC also believes other vendors paid kickbacks to fund companies.

Because most of the largest fund companies handle fund administration in-house, some of the best-known names in the fund industry aren’t likely to be implicated.

If the allegations prove to be true, said Mercer Bullard, founder of shareholder activist company FundDemocracy.com, it would be “far worse conduct than previous fund-trading scandals. Receiving a kickback that comes indirectly out of the pockets of shareholders is the functional equivalent of embezzlement.”

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.