Securities law makes it plain: America's mutual funds are to be managed on behalf of investors-not the people who sell funds or advise fund managers. This put prosecutors on strong ground when evidence emerged last year that many fund companies and their advisers had cooked up side deals that yielded extra fees but diluted investors' returns. On March 15th the Securities and Exchange Commission (SEC) and New York's attorney-general, Eliot Spitzer, announced the largest settlement since the scandal broke: a $675m agreement with Bank of America (BofA) and FleetBoston Financial. BofA's $47 billion takeover of FleetBoston was approved by shareholders two days later. Both banks' mutual-fund subsidiaries were alleged to have allowed "market timers" to trade in and out of their funds, generating higher costs that ate into long-term investors' returns. The scale of the settlement ought to deter other fund-management companies from shafting their customers, at least for a while. Mr Spitzer noted that mutual-fund companies have been penalised to the tune of $1.65 billion so far, $250m more than investment banks settled for last April over conflicts of interest in equity research.
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