Administration February 4, 2004

STC Kicks Back $1M as Ill-Gotten Profit

April 2, 2004 (PLANSPONSOR.com) - A former Phoenix bank that offered trust and custodial services that was swept up in the early days of the ongoing federal/state mutual fund trading probe has handed over $1 million as disgorgement of ill-gotten profits
Reported by

Security Trust Co., which was already shuttered by regulators for its alleged role in allowing hedge funds to illegally make late trades in mutual funds, made the payment Thursday, the Wall Street Journal reported.

Security Trust, which didn’t admit or deny wrongdoing, was accused of facilitating hundreds of mutual-fund trades in nearly 400 funds. The trades, according to the U.S. Securities and Exchange Commission, were made by hedge funds controlled by Canary Capital Partners.

The SEC, in a statement, said 99% of those trades were made after 4 p.m. Eastern time, which is illegal. Security Trust, whose primary business was packaging mutual-fund trades for retirement plans, was accused of concealing the hedge-fund trades by bundling them with retirement-plan trades (See  STC Ex-Execs Hit With Criminal Charges; Regulators Force Dissolution ).

State and federal regulators continue to investigate late trading and market timing activities as well as certain sales practices.

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