Boston-based Massachusetts Financial Services Co. reached a tentative settlement last week with regulators whereby it will pay pay $225 million in penalties and cut its management fees by $125 million, according to people familiar with the talks, the Wall Street Journal reported.

This would mark the second-largest penalty levied in the ongoing mutual fund investigations. MSF is a subsidiary of Sun Life Financial Services of Canada Inc. The investigation into MFS looked at 11 funds that may have been used by market timers, a source told the Journal.

The fee reductions, which amount to $25 million per year over five years, were agreed to by MFS and New York Attorney General Eliot Spitzer, but not the Securities and Exchange Commission, the Journal reported, adding that the deal includes stipulations that MFS change the way it manages funds and to enhance disclosure to investors.

Federal and state authorities have spent months looking into several alleged abuses within several mutual funds, including market timing of mutual funds, which involves buying and selling of fund shares in ways that exploit stale price data and cut into returns of other investors, the Journal reported. Investigators have also looked at late trading, in which illegal trades are made after the market closes and pre-close prices.

Neither the SEC nor MFS commented on the Journal’s initial reports on the settlement.