Bear Stearns' ( BSC) clearing division is losing two of its larger back-office customers amid indications that a two-year-old investigation into the firm's role in the mutual fund trading scandal is nearing an end.

Thomas Weisel Partners is in the process of moving its stock-clearing business away from Bear Stearns to Fidelity's National Financial clearing subsidiary, say people familiar with the situation.

Weisel, which earlier this month filed for an initial public offering, recently notified Bear Stearns of its intention to take its business elsewhere, says a person close to the company. National Financial came up with a better deal than Bear Stearns on the cost of processing trades.

A spokeswoman for the San Francisco-based brokerage founded in 1998 by Thomas W. Weisel, the former chairman and chief executive of Montgomery Securities, was not available for comment.

Weisel is the second major clearing customer to bolt Bear Stearns in recent months. In August, Automated Trading Desk, a South Carolina stock-trading firm, jumped from Bear to the clearing division of Bank of New York ( BK). Automated Trading officials confirmed the move.

Of the roughly 350 small and midsized brokerages for which Bear Stearns provides back-office services, Weisel and Automated Trading Desk ranked in the top 20 in terms of clearing fees generated, say several former Bear Stearns employees.

The customer losses come at an awkward time for Bear. It has been operating under a cloud since the Securities and Exchange Commission voted in May to authorize a civil lawsuit in connection with its alleged role in processing and financing abusive mutual fund trades for numerous hedge funds and small brokers.

The SEC also has notified four top executives in Bear Stearns' clearing division that they could face potential regulatory sanctions over their activities.

The ongoing investigation of Bear Stearns wasn't a major factor in Weisel's decision to move its business. But a source said some at Weisel believed that Bear Stearns' customer service had suffered at the division, in part because of the impact of the probe on the morale of the Wall Street firm's employees.

Shaugn Stanley, a partner with the Weisel firm, disputed that, saying the decision was motivated solely by business considerations.

"We made a business decision based on a variety of factors," she says. "Our decision to move had nothing to do with a degradation of Bear's customer service."

Bear Stearns spokesman Russell Sherman says the firm solicits "feedback from our clients on a constant basis and they continue to tell us that our customer service remains one of the best in the industry."

In fact, readers of Waters magazine, a financial technology trade publication, named Bear Stearns "best clearing" firm this summer.

The investigation of Bear Stearns is one of the last remaining open matters in the two-year-old mutual fund scandal, in which brokers and mutual funds have shelled out nearly $3 billion in penalties and restitution.

Bear, which has set aside at least $200 million to cover the cost of possible settlement, began earnest negotiations with securities regulators following the May vote to formally charge the firm. Sources say that a settlement will be reached in the next four weeks, or the SEC will proceed with a lawsuit that charges Bear Stearns with aiding and abetting securities fraud.

SEC spokesman John Nestor declined to comment. Lewis Liman, a partner with Cleary Gottlieb Steen & Hamilton, who is overseeing the negotiations for Bear Stearns, also declined to comment.

The Wall Street firm has been reluctant to agree to any deal that would require it to pay both a stiff fine and sell all or a portion of its clearing operation -- something regulators pushed for early on in the negotiations. For Bear Stearns, which once was the pre-eminent clearing firm on Wall Street, any deal that requires it to exit the clearing business would be a bitter pill to swallow, and most on Wall Street doubt it will happen.