SEC, Fund Advisor Settle Trading Case

The Securities and Exchange Commission announced a $140-million settlement Wednesday with a mutual fund advisor to the former FleetBoston Financial Corp. over improper trading, the same day the agency filed civil fraud charges against two former employees of the advisor.

The charges against former executives James Tambone and Robert Hussey of Columbia Management Advisors Inc.’s funds distribution unit involve market timing -- the use of quick, in-and-out trades that skim profits from long-term shareholders and benefit favored short-term investors.

In a filing in U.S. District Court, the SEC alleged that Tambone and Hussey allowed certain investors to participate in market-timed trades between 1998 and 2003.

Tambone and Hussey could not be reached for comment.

In the settlement announced Wednesday, Columbia Management Advisors agreed to pay $70 million in restitution and a $70-million penalty without admitting or denying SEC findings.

The order also requires Peter Martin, former national sales manager, to pay $10,000 in restitution and a penalty of $50,000. Erik Gustafson, a former Columbia portfolio manager, agreed to pay a $100,000 penalty. Joseph Palombo, former chief operating officer of Columbia Advisors, was required to pay $100,000, the SEC said.

As part of the settlement, none of the men admitted or denied the SEC findings.

Frances Cohen, an attorney for the Columbia mutual fund unit, did not return a request for comment late Wednesday afternoon.

Bank of America acquired FleetBoston Financial Corp. in a $47-billion deal last year.