The U.S. Securities and Exchange Commission announced it has settled securities fraud charges against a former broker for his part in helping hedge funds trade mutual funds after hours.

Theodore Charles Sihpol III, formerly a broker at Banc of America Securities LLC, has agreed to a US$200,000 penalty and a five-year ban from the securities industry, to settle the charges. The SEC alleged that Sihpol played a key role in enabling Canary Partners LLP, a hedge fund customer of BAS, to engage in late trading in shares of mutual funds sold by BAS and others.

Sihpol consented to the settlement without admitting or denying the allegations.

The commission alleged that 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, it claimed.

As part of the settlement, Sihpol consented to a commission order barring him from the industry for five years. He also consented to the entry of a judgment in federal court, in the Southern District of New York, imposing a $200,000 penalty. The judgment resolves similar allegations contained in an SEC complaint filed in federal court.