NEW YORK (CNNMoney.com) - Bear Stearns will pay $250 million to settle charges of illegal mutual fund trading, the Securities and Exchange Commission and New York Stock Exchange said Thursday.

Shares of Bear Stearns (down $0.80 to $133.41, Research) slipped in mid-morning trade on the New York Stock Exchange Thursday.

SEC said that from 1999 through September 2003, Bear Stearns provided technology, advice and deceptive devices that enabled some customers and brokers to late trade and to evade detection by mutual funds.

The company's payment will consist of $160 million in disgorgement and a $90 million penalty. The money will be paid into a fund to be distributed to mutual funds and mutual fund shareholders who were affected by the fraud.

Bear Stearns helped preferred brokers and hedge funds make trades long after the 4 p.m. cut-off, said SEC representative Mark Schonfeld. Some customers were allowed to trade late, and even cancel unprofitable trades the next day, said the agency.

Customers expressed gratitude for the service by sending Bear Stearns employees event tickets, meals and spa gift certificates.

"For years, Bear Stearns helped favored hedge fund customers evade the systems and rules designed to protect long-term mutual fund investors from the harm of market timing and late trading. As a result, market timers profited while long term investors lost," said the SEC's Linda Chatman Thomsen in a statement.

"This settlement will not only deprive Bear Stearns of the gains it reaped by its conduct, but also require Bear Stearns to put in place procedures to prevent similar misconduct from recurring."

Separately, the brokerage firm said Thursday its quarterly profit rose 36 percent on strong equities and investment banking results.

The investment bank's first-quarter profit jumped to $514 million, or $3.54 a share, from $379 million, or $2.64 a share, a year earlier. Net revenues were $2.2 billion, up 19 percent from last year.

The earnings well exceeded Wall Street's estimates. Analysts were expecting earnings of $2.95 a share, according to Thomson/First Call.

-- from staff and wire reports

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