The SEC has settled its civil action against Theodore Charles Sihpol III, formerly a registered representative with Banc of America Securities LLC (BAS).
The Commission's Complaint, filed in the Southern District of New York, alleges that Sihpol played a key role in enabling Canary Partners LLP (Canary), a hedge fund customer of BAS, to engage in late trading in shares of mutual funds sold by BAS and others.
Late trading refers to the practice of placing orders to buy or redeem mutual fund shares after the time as of which a mutual fund has calculated its net asset value (NAV) (usually as of the close of trading at 4:00 p.m. Eastern Time), but receiving the price based on the prior NAV already determined as of that day.
Sihpol enabled Canary to place orders to buy or redeem mutual fund shares that were received by and cleared through BAS until 6:30 p.m., but that received the price previously determined as of 4:00 p.m. that day (rather than the price determined as of 4:00 p.m. the next day). In the process, Sihpol falsified, altered, destroyed, or evaded the creation of, books and records that BAS was required accurately to create, maintain and preserve.
The Complaint charges Sihpol with violating Section 17(a) of the Securities Act of 1933 (Securities Act), and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Rule 10b-5 thereunder, and with aiding and abetting and causing BAS's violations of Section 17(a) of the Exchange Act, and Rules 17a-3 and 17a-4 thereunder, and seeks a final judgment ordering Sihpol to pay a civil monetary penalty. Sihpol consented to the entry of a final judgment holding him liable for $200,000 in civil penalties.
In a separate administrative proceeding, the Commission barred Sihpol from association with any broker, dealer, or investment adviser, and prohibited him from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter, with the right to reapply for association after five years.
The Commission also ordered Sihpol to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and ordered him to cease and desist from causing any violations and any future violations of Section 17(a) of the Exchange Act, and Rules 17a-3 and 17a-4 thereunder, and Rule 22c-1 promulgated under Section 22(c) of the Investment Company Act of 1940.
Sihpol consented to the settlement without admitting or denying the allegations.
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