U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20168 / June 27, 2007

SEC v. Simpson Capital Management, Inc., et al., Civil Action No. 07-CV-6072(S.D.N.Y.)

SEC Charges Simpson Capital Management, Inc., Robert A. Simpson and John C. Dowling with Mutual Fund Late Trading Scheme

The Securities and Exchange Commission announced that today it filed civil fraud charges against Simpson Capital Management, Inc. ("Simpson Capital"), a hedge fund manager, Robert A. Simpson, its president and owner, and John C. Dowling, Simpson Capital's head trader. In its complaint, filed in the United States District Court for the Southern District of New York, the Commission alleges that, between May 2000 and September 2003, Simpson and Dowling, both of New York City, defrauded hundreds of mutual funds and their shareholders of approximately $57 million when they placed thousands of illegal "late trades" after the close of the market, which enabled them to trade based on after-market events while still obtaining the prices in effect before the market closed. Defendants' late trades were part of a profitable investment strategy that depended for its success on mutual fund trading based on information obtained after the markets closed at 4:00 p.m. ET.

The complaint alleges that Simpson Capital is the investment adviser to two hedge funds, Simpson Partners, L.P. and Simpson Offshore, Ltd. (collectively, the "Simpson Funds"). Between May 2000 and September 2003, Simpson Capital, through Simpson and Dowling, used five separate introducing broker-dealers to place more than 10,700 trades in over 375 mutual funds after 4:00 p.m. ET, and improperly received the current day's net asset value ("NAV"). Some trades were placed as late as 5:45 p.m. By fraudulently late trading, the defendants realized approximately $57 million in ill-gotten gains for the Simpson Funds, and caused corresponding harm to innocent shareholders in the affected mutual funds.

The Commission's complaint further alleges that Simpson was an investor in the Simpson Funds and, as a result of the fraudulent trading, Simpson personally earned at least $19 million in fees and profits. Dowling received more than $996,000 in salary and bonuses during the late trading scheme.

The Commission's complaint alleges that by their conduct, the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement of all ill-gotten gains together with prejudgment interest, and civil monetary penalties.

SEC Complaint in this matter

 

http://www.sec.gov/litigation/litreleases/2007/lr20168.htm

Modified: 06/27/2007