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Banks Accused of Conflicts in Investing Trust Fund Monies In Proprietary Mutual Funds
Class actions have been filed against Wachovia Bank and Bank of America alleging that the banks placed their interests ahead of the interests of their fiduciary clients - trust beneficiaries - when the banks invested in high fee, low performance bank proprietary mutual funds. Other class action suits against other banks may follow.
In 1997 the Board of Governors of the Federal Reserve System issued a cautionary letter to banks which required them to be sure that such conversions to mutual funds were in the best interest of their customers, recognizing that there may be conflicts of interest issue with respect to use of proprietary bank mutual funds.
Source: Money Management Executive
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