Nicole McDermott, a former executive with Phoenix-based Security Trust, has pleaded guilty to securities fraud related to illegal late trading of mutual fund shares by hedge funds.
Security Trust's main business was to facilitate the transfer of mutual-fund trade orders from retirement plans to fund companies.
McDermott and two other former Security Trust executives, CEO Grant Seeger and President William Kenyon, were charged on 25 November with securities fraud, grand larceny and falsifying business records by New York Attorney General Elliott Spitzer and the Securities and Exchange Commission.
McDermott, formerly Security Trust's senior vice president of corporate services, "admitted to directing STC employees to place numerous orders for mutual fund shares on behalf of two hedge-fund clients" after the normal 4 p.m. deadline for getting that day's price for the shares.
Spitzer said the crime is punishable by a maximum of four years in prison. McDermott is expected to return to court for sentencing in June.
The Office of the Comptroller of the Currency, the federal regulator with oversight for Security Trust, has filed an enforcement action aimed at dissolving Securities Trust next year.
The case against Seeger and Kenyon continues.
copyright hedgeweek 2003