NEW YORK (CNNfn) - An investigation into BankBoston's mutual-fund unit ended after the company agreed with Massachusetts securities regulators on new measures to prevent the bank from 'switching' customers into different funds to generate more fees, the two sides said Monday.
As part of the agreement, BankBoston Investor Services Inc. promised to monitor all fund transactions, start an automatic surveillance program and hire an outside monitor.
BankBoston, without admitting any wrongdoing, also agreed with the Massachusetts Securities Division to start a new training program for sales representatives.
The division last summer started investigating into whether bank sales staff were 'switching' customers into different funds to generate more fees.
At issue was whether the changes were necessary -- and whether customers understood the tax and cost implications.
The probe was not triggered by any customer complaints, the division said.
Two top officials from the fund unit resigned during the probe, but BankBoston said the departures were unrelated to the inquiry. Allen Croessmann, head of the fund unit, and Sales chief Cynthia Winslow, both left last year.
"The sale of securities products by banks is being reshaped as we speak in Washington, however in all instances the states want to insure that individual investors are protected," said William Galvin secretary of the Commonwealth of Massachusetts.
The bank manages 18 mutual funds with assets totaling $9.3 billion as of Dec. 31, said spokesman John Stevens. The bank also sells funds from seven families, including Colonial, Eaton Vance, Fidelity, John Hancock, Massachusetts Financial Services, Oppenheimer, and Putnam, he said.
"We're delighted it's been resolved satisfactorily," Stevens said. "Although we believe we've had strong policies and procedures in place, we're happy to have voluntarily enhanced existing policies and procedures to ultimately safeguard the interests of our customers in Massachusetts."