Canadian Imperial Bank of Commerce
is ready to pay at least $100 million to U.S. securities regulators to settle an investigation into the bank's involvement in the mutual fund trading scandal.
The Toronto-based bank, in announcing its second-quarter earnings Tuesday, disclosed that it has set aside an additional $59.25 million toward settling the investigation into the firm's role in helping hedge funds engage in abusive mutual fund trading.
A year ago, the bank set aside $39.5 million for settlement purposes. The bank said it may have to reserve more money before a settlement is announced.
To date, regulators have collected nearly $3 billion in fines and restitution from more than a dozen fund companies and brokerages during the long-running investigation into abusive mutual fund trading.
The additional $59.25 million reserve resulted in an after-tax charge of 21 cents a share for CIBC. In the quarter, the bank earned $347.6 million, or 95 cents a share, down from $559 million, or $1.55 a share, in the year-ago period. (All figures have been converted into U.S. dollars).
The decision by CIBC to set aside more money for a settlement comes at a time that the
Securities and Exchange Commission
and New York Attorney General Eliot Spitzer are close to resolving an 18-month investigation, which also includes activities at
Oppenheimer & Co.
, the brokerage arm that CIBC sold to Fahnestock in January 2003. After the sale, Fahnestock adopted the Oppenheimer name.
Last week, Oppenheimer reported that
several current and former employees are facing potential regulatory action over their involvement in abusive mutual fund trading. The firm's filing said the trading activities at Oppenheimer occurred "largely during the period" that the brokerage group was part of CIBC World Markets, a division of CIBC.
previously reported that Robert Okin, an Oppenheimer executive vice president, and Marshall Dornfeld, a managing director, were two employees under regulatory scrutiny, according to people familiar with the inquiry. Regulators have focused on the two executives because of the role each played at Oppenheimer in overseeing
broker Michael Sassano and his former team of 15 traders and junior brokers.
In the early days of the mutual fund investigation, Spitzer's office indicted former CIBC investment banker Paul Flynn on
charges that he provided financing to hedge funds, some of them Sassano customers, that engaged in illegal late trading. The charges stem from a period when CIBC still owned Oppenheimer.
Flynn, who pleaded not guilty to the charges, is scheduled to go on trial this fall.