“Massachusetts Financial Services Co. said the Securities and Exchange Commission is investigating the mutual-fund firm’s financial relationships with Morgan Stanley and other brokerage firms,” writes Deborah Solomon in today’s Wall Street Journal.

“In an SEC filing, MFS said the company has ‘been under investigation by the SEC relating to its directed brokerage and revenue-sharing arrangements with various distributors of its products, including Morgan Stanley.’ “

“The SEC has been looking into business arrangements between fund companies and brokerage houses as part of a broad probe into whether brokerage firms steered investors to certain mutual funds because of payments they received from fund companies or their investment advisers as part of sales agreements.”

“SEC officials have said that in some cases, funds direct trading commissions to brokerage houses that favor those fund companies’ products. The SEC said recently that it had opened investigations into eight brokerage houses and a dozen mutual funds that engaged in a practice known as ‘revenue sharing.’ “

“MFS said in its filing that the outcome of the SEC investigation ‘is not yet determinable and may result in sanctions, compensation payments or other financial penalties.’ “

“The inquiry into MFS stems from the SEC’s investigation of Morgan Stanley. Last year, Morgan Stanley agreed to pay a $50 million civil penalty to settle charges relating to the way the firm sold mutual funds. MFS, a unit of Sun Life Financial Inc., Toronto, said in its filing that it was one of the 14 fund companies reported to be on Morgan Stanley’s ‘preferred’ list of mutual-fund providers.”

“MFS has been caught up in the burgeoning mutual-fund scandal. The company recently agreed to pay $225 million to settle federal and state civil charges that accused the company of allowing sophisticated traders to profit from rapid trading, or market timing, in 11 of its funds.”

“In its filing, MFS said the SEC has also requested information from certain subsidiaries ‘regarding practices with respect to subaccount market timing, practices with respect to receiving and processing exchange orders from contract owners, and oversight of such activities in separate accounts.’ MFS said it had responded to those requests.”