U.S. Securities and Exchange Commission
Litigation Release No. 18653 / April 1, 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.)
SECURITY TRUST COMPANY, N.A. PAYS $1 MILLION IN MUTUAL FUND MARKET TIMING AND LATE TRADING FRAUD ACTION
The Securities and Exchange Commission announced that, on March 31, 2004, the United States District Court for the District of Arizona entered a final judgment in a mutual fund market timing and late trading case against defendant Security Trust Company, N.A. (STC), an uninsured national banking association based in Phoenix, Arizona. Among other services, STC effected mutual fund trades for participants in retirement plans and processed data regarding those trades for the plans' third party administrators (TPAs). In accordance with the final judgment, STC paid $1 million in disgorgement on March 31, 2004, when STC was shut down pursuant to orders from its primary regulator, the Office of the Comptroller of the Currency. STC consented to the entry of the judgment without admitting or denying the allegations in the Commission's complaint.
In addition to STC, the Commission's complaint, filed on November 25, 2003, charged STC's former chief executive, Grant D. Seeger, 40, of Phoenix; its former president, William A. Kenyon, 57, of Phoenix; and its former senior vice president, Nicole McDermott, 34, who resides near Phoenix. McDermott consented to the entry of a final judgment that was entered on February 23, 2004. The case is pending against Seeger and Kenyon.
The Commission's complaint alleged the following:
The complaint charged STC, Seeger, Kenyon, and McDermott 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 Seeger, Kenyon and McDermott and a judgment of permanent injunction against Seeger and Kenyon.
For additional information, see Litigation Release No. 18479 (Nov. 25, 2003).