UPDATE: Regions Financial To Pay $1 Million SEC Penalty In Fraud Case

(Adds company comment and updates share price.)

 
   DOW JONES NEWSWIRES 
 

Regions Financial Corp. (RF) will pay a $1 million penalty to settle Securities and Exchange Commission charges that Regions Bank assisted in a fraud that victimized thousands of investors, mostly in Latin America.

The $1 million will be put into a fund to compensate investors in the fraud.

According to the SEC, Regions Bank and its predecessor, Union Planters Bank, played a key role in the investment scheme because a relationship with a U.S. bank gave Latin American investors the impression that their funds would be secure.

The agency previously charged unregistered broker-dealers U.S. Pension Trust Corp. and U.S. College Trust Corp. with deceptively charging investors exorbitant, undisclosed commissions and fees in the sale of mutual funds through a series of investment plans. Regions Bank was trustee of the investment plans.

"Regions Bank was aware or should have been aware of USPT's deceptive sales practices, yet agreed to participate in these investment plans and associate its name and reputation with USPT," said Glenn S. Gordon, associate director of the SEC's Miami regional office.

A statement from Regions on Monday afternoon said the company cooperated with the SEC to resolve the issue promptly.

"This was a legacy relationship entered into by Union Planters Bank almost eight years ago and does not represent our current business focus or practices," the company said. It also pointed out that despite the SEC's problems with USPT's disclosure, the agency found that Regions appropriately informed clients of its fees in its trust agreement.

According to SEC allegations, USPT illegally raised at least $255 million from more than 14,000 investors. USPT was accused of failing to disclose that it subtracted substantial amounts from contributions to the investment plans as sales commissions and other fees.

Regions' shares were at $6.63 in after-hours trading. The stock has lost about two-thirds of its value in the past year.

-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357; [e-mail]