Originally created 04/24/04

Fiserv investigated for possible improper mutual fund trades

BROOKFIELD, Wis. -- A Fiserv Inc. division is being investigated for possible improper mutual fund trades, the company's chief executive says.

The Brookfield firm, which provides transaction processing and other back-office functions for the financial industry, has fired or reassigned about a dozen employees as a result of the Securities and Exchange Commission inquiry and its own review, CEO Leslie M. Muma said Thursday.

Muma also said the company has "put in a lot of better controls."

Most of the activity being investigated came from the clearing business that Fiserv bought in 2002 from Investec Ernst & Co., he said.

Fiserv is considered culpable by the SEC for clearing improper trades for broker-dealers who were clients, he said. Two types of trades are under scrutiny: so-called "late trades" in which brokers were given that day's closing price hours after the market closed, allowing them to illegally cash in on late market moving news, and "market-timing trades," short-term in and out trading that hurts the results of long-term investors in the funds.

The company has been cooperating with the SEC, Muma said.

The $4 million to $5 million Fiserv said it made on the trades in question came from transaction fees paid by broker-dealers, Muma said.

"It was for the most part several hedge funds that will go nameless, a total of probably four or five customers - a very tiny part of Fiserv's business," he said.

The firm said it could be subject to fines or other penalties by the SEC, depending on the outcome of the probe.

The Fiserv executive told stock analysts in a call Thursday that Fiserv is evaluating its customers in the securities business.

"Any customers that we feel are weak or suspect or could potentially have problems, we're asking them to leave," Muma said.

Fiserv reported first-quarter net income increased 25 percent to $92.8 million, or 47 cents per share as revenues grew to $937.5 million.


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