First revealed last week in financial report from the bank, the employee who committed the rapid trading remains unnamed, although the Honolulu Advertiser is reporting that the person was of executive rank and has already been fired by the bank. The newspaper is also reporting that that the malfeasance earned the executive $110,000 between 2002 and 2003 and that the trading occurred in the bank's New Asia Growth Fund.
Those two points are somewhat noteworthy. Since the employee was of executive rank, he or she would have knowingly breached their fiduciary duty to the fund's shareholders and personally gained from the venture, which is particularly aggravating to the SEC. And since it occurred in an international fund, it's likely the executive was taking advantage of stale pricing, another SEC pet peeve.
The bank said that it doesn't anticipate that case will have an adverse effect on it or its customers, but considering the offense and the regulator's administration of previous market-timing penalties, it's probably safe to assume the SEC won't be wearing kids gloves if it decides to impose a fine. The bank was notified of the SEC probe through a Well notice, which typically means the regulator is planning on pursuing a civil action.
The bank said last week that the case would cost $3.8 million to cover legal fees and administrative-related costs.
The bank has also said that recipients of the Wells notice did not profit form the alleged wrongdoing and it has already agreed to reimburse the New Asia fund for losses and legal costs, the Advertiser reported.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.