Bank of America settles SEC charges on mutual fund bias

Bank of America (NYSE: BAC) is paying $6 million in fines to settle SEC charges that the company favored the recommendation of its own mutual funds while purporting to be offering unbiased advice. From the SEC's release on the matter, "The recommendations were supposed to be based upon an objective and unbiased research methodology that was outlined for clients and prospective clients in promotional literature and disclosures. However, in certain instances, Banc of America Investment Services and Banc of America Capital Management focused on subjective criteria in the research process, which favored Nations Funds, and resulted in increased assets under management for Banc of America Capital Management."

15,000 customer accounts were effected, and the settlement will be used to compensate those customers: an average of $400 each. The average "losses" to consumers were quite small, but there's an important principle here for investors to keep in mind: be wary of any advisor who suggests that you buy their products.

If you choose to work with a financial planner/advisor/manager, make sure it's a fee-only one, not someone paid on commission.

Better still, put together your own portfolio of low-cost index mutual funds. For a couple great examples, check out Ben Stein's model portfolios.