Mutuals.com Settles With SEC Over Market Timing
October 8, 2007
The Securities and Exchange Commission has settled its lawsuit against Mutuals.com and two related investment advisors, Connely Dowd Management and MTT Fundcorp, along with the firms' three principals, Richard Sapio, Eric McDonald and Michele Leftwich.
Based on their sworn representations of the firm's financial state and their own personal situations, the SEC is waiving disgorgements, interest and penalties for the firm and two of the principals. Only Sapio will have to return $57,674 in disgorgement, $11,055 in interest and a $120,000 civil penalty.
The firm had been fined $4,580,798 in disgorgement plus prejudgment interest of $1,042,492, while McDonald faced a total of $70,693 in fines and Leftwich a total of $47,232.
The SEC said the three executives market timed hundreds of mutual funds between 2001 and 2003 and tried to hide their activities by using multiple accounts for individual clients, multiple registered representative numbers and branch codes and multiple clearing brokers.
The SEC also said Mutuals.com began late trading mutual funds in 2003. During this period, the firm earned wrap fees of $4.5 million.
Had the settlements not been reached, each of the three faced a maximum penalty of 30 years in prison on the wire fraud count and up to 20 years in prison on the securities fraud charge.
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