State and federal securities regulators have prepared criminal and civil charges against a former employee of Bank of America over illegal mutual fund trading practices, a source familiar with thecase said Tuesday.
New York Attorney General Eliot Spitzer planned an announcement Tuesday of felony larceny and securities fraud charges against former BofA broker Theodore Sihpol III under New York’s Martin Act, a law enforcement source said, speaking on condition of anonymity.
The Securities and Exchange Commission was set to simultaneously announce civil charges against Sihpol, the source said.
It’s expected to be the first of several criminal cases flowing from the mutual fund investigation announced earlier this month, according to the source.
Bank of America spokesman Robert Stickler said the bank had not been notified of any charges. He said he did not have a way to reach Sihpol, who was fired last week, along with several other employees, including the head of its mutual fund business, Nations Funds. Directory assistance had no listing for Sihpol in the New York area.
Spitzer’s office would say only that it planned a “major enforcement action” in the case Tuesday, spokesman Darren Dopp confirmed. He declined to elaborate.
The case stems from Spitzer’s investigation of Canary Capital Partners, a multimillion dollar hedge fund that agreed to pay $40 million to settle charges that it had improper trading arrangements with several mutual fund companies, including Bank of America. Canary has admitted no wrongdoing and is cooperating with the investigation.
Spitzer’s office began looking into mutual fund trading earlier this year, mostly focusing on an illegal practice called late trading, in which insiders trade at the current day’s price after the New York markets close, allowing them to profit in ways ordinary investors can’t.
