Regions to pay $1M penalty in investment fraud

MIAMI — Regions Bank has agreed to pay a $1 million penalty to settle a Securities and Exchange Commission complaint that it played a role in a long-term investment fraud that charged huge hidden fees and sales commissions to thousands of unwitting Latin American investors.

The Birmingham, Ala.-based bank and its predecessor, Union Planters Bank, acted as trustees for a pair of unregistered investment brokers — U.S. Pension Trust Corp. and U.S. College Trust Corp. — that have previously been charged as deceptive by the SEC. Regions allowed its name to be used in marketing materials, helped prepare a promotional video and met with prospective investors and some of the schemes’ 2,000 unregistered sales agents.

“Regions Bank provided a false air of legitimacy to this scheme,” said Glenn S. Gordon, associate director of the SEC’s office in Miami.

Without telling investors, the two investment plans deducted between 18 percent and 85 percent of contributions to pay large sales commissions and enhance the plans’ own profits. The SEC claims that $255 million was raised illicitly from about 14,000 investors.

The SEC charged that Regions’ did not adequately disclose the fees to investors in its trust agreement papers, which were called “misleading” in court papers.

In a statement, Regions said it cooperated with the SEC investigation and that the investment arrangement “does not represent our current business focus or practices.” The statement also said the clients were fully informed of the bank’s own fees as part of trust agreements.

The trust arrangement was begun in 2001 by Union Planters, which merged with Regions in 2004.

Regions stopped accepting new clients from the investment plans in January 2008 and halted processing contributions and renewals for existing plans last month. The accounts currently hold about $95 million in mutual fund assets for 11,000 investors, according to the SEC.

The $1 million penalty will go into a fund created to compensate investors harmed by the fraud.