The board of RS Investment Trust didn't know that Edward Stern's now-defunct hedge fund Canary Capital Partners was engaging in late trading in one of its mutual funds, the co-chairman of RS Investment testified Thursday in the criminal trial of the former Bank of America broker, who allegedly facilitated the trades.

Leonard B. Auerbach, independent co-chairman of the trust, also told a prosecutor that board members would not have accepted the trades had they known when they were being placed.

Former Bank of America broker, Theodore Sihpol III, is accused of helping Canary make trades after the 4 p.m. market close, an illegal practice called late trading, which was brought to light during New York Attorney General Eliot Spitzer's investigation of the $7 trillion mutual fund industry in September 2003. Sihpol, who is the first individual to be tried in a criminal court in the aftermath of the investigation, faces up to 30 years in prison, if convicted.

The court saw a document indicating Canary made a number of trades in the RS Emerging Growth Fund after the 4 p.m. deadline. One trade, for $14 million worth of shares in the fund, was made around 6:39 p.m. on June 25, 2003.

Auerbach's testimony followed a day of similar remarks on Wednesday by executives at other mutual funds, including Dennis Mullen, the independent chairman of Janus Investment Fund, and Gary Childress, an independent trustee of the Pimco Trust.

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