Regions Bank has been accused by the Securities and Exchange Commission of defrauding 14,000 investors by charging exorbitant, undisclosed commissions and fees in connection with the sale of mutual funds.
Regions, with 17 offices in Manatee and Sarasota counties, used a network of 2,000 unregistered sales agents to sell mutual funds through two unregistered investment brokers — U.S. Pension Trust Corp. and U.S. College Trust Corp. — to investors residing primarily in Latin America.
Until March 2006, the trusts did not disclose to new investors that they took up to 85 percent of investors’ annual contributions and as much as 18 percent of investors’ lump-sum contributions to pay exorbitant sales commissions, the SEC suit claims Monday in U.S. District Court Southern District of Florida Monday.
Regions has agreed to pay a $1 million penalty to settle the SEC complaint. The penalty will go into a fund created to compensate investors harmed by the fraud.
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“Regions Bank provided a false air of legitimacy to this scheme,” said Glenn S. Gordon, associate director of the SEC’s office in Miami. The SEC claims $255 million was raised illicitly.
Regions, which served as trustee of the plans since October 2001, knew or should have known that exorbitant commissioners and fees were not disclosed in marketing materials or documents provided to investors by the U.S. Pension Trust Corp. and U.S. College Trust Corp., Florida corporations located in Coral Gables, the SEC said in the suit.
The SEC filed a civil injunctive action against U.S. Pension Trust and U.S. College Trust Corp., accusing them of violating the antifraud and broker-dealer registration provisions.
The trust arrangement was begun in 2001 by Union Planters, which merged with Regions in 2004. Regions stopped accepting new clients from the investment plans in January 2008, and halted processing contributions and renewals for existing plans last month. The accounts currently hold about $95 million in mutual fund assets for 11,000 investors, according to the SEC.
Regions, based in Alabama, operates in 16 states, has total assets of $135 billion and total liabilities of $121 billion. It received a three-star rating through June 30 in the recent Bauer Financial Report.
— This report includes material from the Associated Press.