A top U.S. law firm committed malpractice by advising executives at an investment management firm to accept illegal late mutual fund trades from three hedge funds, a lawsuit claims, TheStreet.com reports.

The firm, Piper Rudnick, allegedly advised executives from Brean Murray, an investment banking and investment management firm, to take late trade requests from three hedge funds – Canary Capital, Veras Investment Partners and Tewksbury Capital. Now those executives, Ryan Goldberg and Michael Grady, face what they call "significant sanctions." Their lawsuit seeks more than $1 million in legal expenses and lost wages.

The three hedge funds have all been caught up in the rungs of the mutual fund scandal for trades of the most egregious variety – post-4 p.m., late trades that are not just unethical but illegal.

Piper said the suit has no merit. The alleged advice given by the firm was that trades after 4 p.m. were fine, as long as they took place before the mutual fund companies "disseminated" the fund’s net asset value for that day. Many brokerages do not finish processing trades until 5:30 p.m. or later, an issue still unresolved by Securities and Exchange Commission reform proposals.

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