According to a news release from the Securities and Exchange Commission (SEC), three former managers – including former CEO Daniel Leland – have also been fined and have received partial 12-month suspensions. The two other executives involved were Kerry Rigdon and Kevin Marsh. The three former managers are banned from serving in a supervisory capacity with a brokerage firm for one year. Leland resigned last September, according to the release.
The allegations surrounding Southwest, a division of SWS Group, assert that the company and key management personnel failed to properly supervise a group of brokers who were market timing and late trading certain mutual fund shares. In its investigation with the New York Stock Exchange, the SEC found that the company failed to heed complaints from numerous mutual fund companies that some of the firm’s brokers were involved in these illegal practices, and failed to respond to red flags raised by such activity.
Southwest neither admitted nor denied wrongdoing in the settlement, paying $8 million in fines and $2 million in restitution are part of the settlement.
In the 18 months since the opening of the probe into the mutual fund industry by New York Attorney General Eliot Spitzer, almost $3 billion in fines have been collected in relation to charges of market timing and late trading.