“The Securities and Exchange Commission, aiming to ratchet up penalties on executives with knowledge of improper mutual-fund trading, is seeking to suspend temporarily Massachusetts Financial Services Co. Chief Executive John W. Ballen from the industry, according to people familiar with the matter,” writes John Hechinger in today’s Wall Street Journal.

“The tough stance from the SEC comes as the federal agency, New York Attorney General Eliot Spitzer and the New Hampshire Bureau of Securities Regulation are finalizing a settlement with MFS over allegations that the nation’s 11th-largest fund firm improperly allowed quick-fingered investors to skim profits from long-term fund holders through rapid trading of fund shares.”

“Under a tentative agreement, which was previously reported, Boston-based MFS would pay $225 million in penalties and accept $125 million in management-fee cuts over five years, according to people familiar with the matter. But in addition, the SEC is targeting individuals.”

“Along with Mr. Ballen, the SEC is seeking a suspension of another MFS executive, whose identity couldn’t be determined Wednesday, these people say.”

“Mr. Ballen didn’t return phone calls. Spokesmen for the SEC and MFS, a unit of Sun Life Financial Inc., declined to comment. Mr. Ballen’s attorney, John Falvey, also declined to comment.”

“The SEC typically seeks a suspension — known as a “time out” among securities lawyers — in cases it considers especially serious, says Howard Schiffman, a former SEC enforcement attorney who’s now a lawyer in Washington.”

“Such suspensions, which typically last a matter of months, ‘send a stronger message,’ because large regulatory fines have become commonplace, while even short bans are considered embarrassing to firms and executives, Mr. Schiffman added.”

“Mr. Ballen, 44 years old, has been something of a wunderkind in the $7 trillion mutual-fund industry — and like so many at MFS, a home-grown talent. A graduate of Harvard University with a Stanford University M.B.A., he joined the MFS research department in 1984 and quickly rose through the ranks, becoming a portfolio manager and, ultimately, the company’s CEO in 2002.”

“Mr. Ballen also has been an important player in the transformation and rapid growth of MFS, with $140 billion in assets, including $76 billion in mutual funds. Eighty-year-old MFS had long been known as an old-line conservative fund shop that claims to have invented the mutual fund, Massachusetts Investors Trust.”