In the first criminal trial from New York Attorney General Eliot Spitzer’s campaign to reform the mutual fund industry, a former Bank of America broker has been accused of aiding illegal trading, according to Reuters.
Spitzer has accused 37-year-old Theodore Sihpol of helping hedge fund manager Edward Stern make improper trades in and out of funds and illegal after-hours “late trading, a charge that if convicted carries a possible 25 years in prison.
Spitzer’s investigations have been a catalyst for reforms and extracted billions in fines and restitution from the $8.1 trillion fund industry, according to the news agency. Several top executives have been ousted, including the heads of Putnam Investments and Strong Funds.
Bank of America fired Sihpol and others, including mutual fund chief Robert Gordon, in September 2003. Spitzer accused the bank of helping Stern’s Canary Capital Partners LLC trade funds illegally. While both admitted no wrongdoing, the bank settled regulatory accusations for $675 million, and Canary settled with Spitzer for $40 million.
Spitzer has said that Sihpol aided Canary in making trades after markets closed, at the 4 p.m. price. Regulators call such late trading illegal, akin to betting on a completed horse race, said Reuters.