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Regulation and Compliance > Federal Regulation > SEC

Calugar Settles With SEC

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WASHINGTON (–After two years, Daniel Calugar has settled civil charges brought by the Securities and Exchange Commission that he engaged in late trading and market timing of mutual fund shares, and agreed to pay US$153 million in disgorgement and penalties.

The charges stemmed from trades Mr. Calugar made at Massachusetts Financial Services Co., Boston, and Alliance Capital Management LP, New York. In a complaint filed in December 2003, SEC officials said Mr. Calugar, through his now-shuttered Las Vegas broker-dealer firm, Security Brokerage Inc., earned profits of US$175 million by conducting late trading and market timing, mostly of mutual fund shares at MFS and Alliance.

As part of the settlement, Mr. Calugar agreed to give back US$103 million in profits he earned and pay a civil penalty of US$50 million. He had already settled a US$72 million class-action lawsuit, and SEC officials said they would seek to have the entire US$225 million amount placed in escrow and eventually returned to investors who were harmed by Mr. Calugar’s trading.

Mr. Calugar did not admit or deny the SEC’s allegations, but that fact did not prevent the SEC’s director of enforcement, Linda Chatman Thomsen, from holding Mr. Calugar’s settlement out as an example of the SEC’s low tolerance for market timing and late trading. “Daniel Calugar’s late trading was phenomenally profitable to him and came at the expense of long-term mutual fund shareholders,” she said in a statement. “The magnitude of this settlement reflects both the seriousness of the wrongdoing and the Commission’s resolve to hold accountable those who defraud mutual fund shareholders.

Randall R. Lee, regional director of the SEC’s Pacific Regional Office, said the US$50 million penalty was the largest imposed so far by the SEC on an individual in a late-trading or market-timing case.

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Contact Bob Keane with questions or comments at [email protected].


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