U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18606 / March 3, 2004
SECURITIES AND EXCHANGE COMMISSION v. SECURITY TRUST COMPANY, N.A., GRANT D. SEEGER, WILLIAM A. KENYON, AND NICOLE MCDERMOTT, Civil Action No. CV 03-2323 PHX JWS (D. Ariz.)
FORMER EXECUTIVE OF SECURITY TRUST COMPANY ENJOINED IN MUTUAL FUND MARKET TIMING AND LATE TRADING FRAUD ACTION
The Securities and Exchange Commission announced that, on February 23, 2004, the United States District Court for the District of Arizona entered a judgment in a mutual fund market timing and late trading case against defendant Nicole McDermott, a former senior vice president at Phoenix, Arizona-based Security Trust Company, N.A. (STC). The Final Judgment enjoins McDermott from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. McDermott consented to the entry of the judgment without admitting or denying the allegations in the Commission's complaint. The judgment provides that the court will retain jurisdiction to determine the appropriateness and amounts of disgorgement, prejudgment interest and a civil penalty and will for this purpose accept as and deem true the facts alleged in the Commission's complaint.
In addition to McDermott, 34, who resides near Phoenix, the Commission's complaint, filed on November 25, 2003, charged STC, an uninsured national banking association that, among other services, effected mutual fund trades for participants in retirement plans and processed data regarding those trades for the plans' third party administrators (TPAs); STC's former chief executive officer, Grant D. Seeger, 40, of Phoenix; and its former president, William A. Kenyon, 57, of Phoenix. The case is pending against these defendants.
The Commission's complaint alleged the following:
The complaint charged McDermott, STC, Seeger, and Kenyon with violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. STC is also charged with violating Rule 22c-1, under Section 22(c) of the Investment Company Act of 1940, which prohibits the purchase or sale of mutual fund shares except at a price based on the current NAV of such shares that is next calculated after receipt of a buy or sell order. Seeger is also charged with violating Section 37 of the Investment Company Act, which prohibits stealing the assets of a registered investment company. The Commission is seeking an accounting, disgorgement, and penalties from all defendants and a judgment of permanent injunction against Seeger and Kenyon.
For additional information, see Litigation Release No. 18479 (Nov. 25, 2003).