Theodore Sihpol III, a former broker at Banc of America Securities (BAS), and poster boy for the market-timing scandals — and the first target of Spitzer to say no to a plea offer — has settled with the SEC.
In 2003, the SEC alleged that Sihpol helped Canary Capital Partners, a hedge fund customer of BAS, engage in late trading in mutual funds. “In the process, Sihpol falsified, altered, destroyed or evaded the creation of books and records that BAS was required to create…and preserve,” says an SEC release. Per the settlement, Sihpol consented to a five-year ban from the industry and a $200,000 fine.
New York Attorney General Eliot Spitzer indicted Sihpol at the same time as the SEC, but for grand larceny and fraud relating to the same abuses. Interestingly, no broker had been brought up on charges of late trading by the SEC at the time. Soon after the indictments the SEC proposed a hard 4 p.m. close on all trades.
At the time of his indictment, Spitzer had been both praised and admonished for squeezing plea agreements out of the alleged criminals. Sihpol shocked everyone when he rejected the attorney general's plea deal and opted to go to court.
He shocked everyone further when he won: He was acquitted this past June on 29 of 33 charges, all relating to mutual fund trading. The jury was “hung” on the last four counts. An irritated Spitzer said he'd try the BAS broker again. Since this settlement resolves only the SEC charges, that is still a possibility, though observers say it is unlikely.
Sihpol consented to the settlement without admitting or denying the charges.