Brokerage owner to pay $153 million to settle SEC charges | VailDaily.com
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Brokerage owner to pay $153 million to settle SEC charges

WASHINGTON – The majority owner of Security Brokerage Inc. of Las Vegas agreed to pay $153 million to resolve civil charges that he defrauded investors from 2001 to 2003 through a series of abusive mutual-fund trades, regulators said on Tuesday.Daniel Calugar, the president and majority owner of the firm, will pay a $50 million civil penalty and $103 million in disgorgement of improperly earned profits. The civil penalty is the largest yet levied against an individual in a series of settlements that have grown out of the market timing and late trading cases that have emerged since September 2003.Calugar also accepted a permanent ban on working for a brokerage firm as part of his settlement with the Securities and Exchange Commission. The settlement still faces court approval. Calugar reached the agreement with regulators without admitting or denying wrongdoing.”Daniel Calugar’s late trading was phenomenally profitable to him and came at the expense of long-term mutual fund shareholders,” SEC enforcement director Linda Thomsen said in a statement.The SEC had accused Calugar of making trades for his own personal benefit, using both market timing and late trading. Market timing involves repeated buying and selling of fund shares, a strategy that hurts long-term investors by diluting the value of their shares and generating transaction costs and tax bills. Late trading involves making trades after the 4 p.m. close of trading while paying the 4 p.m. price, illegally taking advantage of market-moving information that hasn’t yet been factored in to the price.Steve Scholes, an attorney for Calugar, could not immediately be reached for comment.Calugar primarily market-timed funds run by Alliance Capital Management and Massachusetts Financial Services; he was the largest market timer in the Alliance funds, the SEC said. He had agreed to make “long-term” investments in Alliance hedge funds in exchange for permission to time its mutual funds, the SEC said.As for late trading, Calugar routinely used Security Brokerage to transmit trades for his own account one to two hours of the 4 p.m. close of trading, the SEC said. The firm then created false internal records to show that the order time for the trades was 3:59 p.m., the SEC said.The SEC is casting a wide net in its continuing probe of mutual-fund trading abuses, which were first uncovered by New York Attorney General Eliot Spitzer in September 2003. In its latest efforts, the SEC has reached settlements with hedge funds including Millennium Partners LP and sued other hedge-fund managers who have denied wrongdoing.Vail, Colorado


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