September 22, 2003
BoA Broker Faces 25 Years In Prison in Canary Caper
Theodore C. Sihpol III, a former broker with Bank of America who was just fired from his job (see News Flash, page 4), has been charged with state criminal and federal civil charges.
New York State Attorney General Eliot Spitzer last week charged Sihpol with securities fraud and criminal grand larceny in the first degree, and the Securities and Exchange Commission charged him with federal civil charges. Both charges stem from Sihpol's allegedly permitting Canary Capital Partners and other hedge funds to conduct late trading in Bank of America's Nations Funds. Sihpol, who surrendered to regulators, is out on $750,000 bail.
Each criminal count Sihpol faces is a felony. If he is convicted of grand larceny, Sihpol faces a mandatory term of 25 years in state prison.
"This is a wide-ranging and continuing investigation, which is likely to result in numerous other charges," Spitzer announced at a press conference.
NASD Fines Morgan $2M for Fund Contests
The National Association of Securities Dealers has fined Morgan Stanley $2 million for conducting prohibited mutual fund sales contests to promote the firm's own mutual funds. In addition, NASD charged both the firm and Bruce F. Alonso, head of its retail sales division, with supervisory violations. Alonso has been censured and fined $250,000. In settling the accusations, neither Morgan Stanley nor Alonso admitted or denied the charges.
NASD said that in a national campaign whose goal was to achieve more than $5 billion in sales of Morgan Stanley funds, national, regional and branch sales managers set individual sales goals of $50,000 to $100,000 per financial adviser. In 29 separate contests, Morgan Stanley allegedly tried to entice salespeople to sell these funds by offering not only monetary rewards but also tickets to the NBA finals, Rolling Stones and Britney Spears concerts, and trips to such places as Hawaii and the Caribbean. Other prizes included tuition for golf school and a high-performance automobile racing school. Managers' bonuses, meanwhile, were tied to sales of the firm's proprietary funds, NASD said.
Canary Fund Administrator Sued for Criminal Activity
Olympia Capital, a fund administrator in Bermuda that services embattled Canary Capital Partners, was sued in June in New York's Eastern U.S. District Court for allegedly running a criminal enterprise to take control of real estate companies run by Thomas B. Donovan. Olympia allegedly offered financing to Donovan that did not exist and that would have left Donovan vulnerable, according to the civil suit.
SEI, Hyland Team Up On SMA Platform
Asset management firm SEI Investments has hired Hyland Software to power its separately managed account platform.
Hyland's OnBase4 integrated document management software will enable SEI to offer virtual, straight-through processing to its middle and back office so that clients can focus more readily on core investment management and value-added activities.
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