“Massachusetts Financial Services Co., seeking to shore up credibility with investors after being charged in the mutual-fund scandal, named former Fidelity Investments mutual-fund chief Robert C. Pozen as its nonexecutive chairman,” writes John Hechinger in today’s Wall Street Journal.

“The move comes after MFS, a unit of Toronto-based Sun Life Financial Inc., last week settled state and federal regulatory charges of civil fraud by agreeing to pay $225 million in penalties and cut fees by $125 million, or almost 6%, over five years. In addition, MFS Chief Executive John Ballen and President Kevin Parke were banned for three years from serving as officers or directors of a mutual-fund company, among other sanctions.”

“Mr. Pozen, a lawyer by training, has been credited with instituting tighter controls and turning around often uneven investment performance at Fidelity, also known as FMR Corp., which was known as having something of a gun-slinging culture in the mid-1990s. Mr. Pozen, 57 years old, currently a visiting professor at Harvard Law School, Cambridge, Mass., recently stepped down as secretary of economic affairs for Massachusetts Gov. Mitt Romney. In 2001, Mr. Pozen left closely held Fidelity — like MFS, based in Boston — after 14 years.”

“Perhaps most relevant to MFS today, Mr. Pozen, a mutual-fund-regulatory expert and former associate general counsel at the Securities and Exchange Commission, pushed successfully for stricter restrictions on personal trading among Fidelity fund managers — a move that wasn’t popular among managers at the time. Mr. Pozen also advocated measures such as redemption fees to discourage rapid fund trading.”

“Fidelity, the nation’s largest mutual-fund company, has avoided involvement in the industry’s burgeoning share-trading scandal.

In an interview Monday, Mr. Pozen said ‘my major thrust is make sure MFS has the highest standards in the industry going forward.’ “

“Mr. Pozen succeeds Jeffrey L. Shames, the current nonexecutive chairman and 21-year MFS veteran. Before the fund scandal hit, Mr. Shames indicated he would retire in 2003, but he agreed to stay on until the recent settlement was reached.”

“Regulators accuse MFS executives of letting investors conduct rapid trading in 11 funds, in violation of fund prospectuses. New York Attorney General Eliot Spitzer said fund investors suffered $175 million in losses. MFS and its two top executives settled charges from the SEC, Mr. Spitzer and New Hampshire regulators without admitting or denying wrongdoing.”

“MFS has said that investors’ losses, which it has quantified at $100 million, weren’t due to rapid trading, or market timing, which it acknowledges permitting in certain funds. Rather, MFS says, those losses came from illegal late trading — or investors who placed orders after the 4 p.m. close but received pre-4 p.m. prices. MFS says it didn’t know about the late trading because the orders were placed through brokerage houses and other intermediaries.”

“Monday, Mr. Pozen said part of his job at MFS is to oversee legal action against late traders to recover money for shareholders.”