The Securities and Exchange Commission announced it had reached a settlement Tuesday with two brokers for engineering a scheme that facilitated market timing and late trading at the cost of long-term mutual fund shareholders. Lawrence S. Powell and Delano Sta. Ana, former registered representatives of the Boca Raton. Fla.-based brokerage firm Kaplan & Co. Securities, did not admit or deny the findings.
They were ordered to pay a total of $750,000, split evenly, after the SEC found that they employed several methods to hide the identities of their customers from mutual funds to allow rapid in-and-out trading in those funds. Among them, Powell and Sta. Ana used Kaplan's New York branch office to set up a second branch code to allow customers to time the funds that had banned them and Kaplan's Florida branch. Also, the brokers helped customers establish accounts with multiple clearing firms to help hide their identity.
The brokers were charged with facilitating late trading, a violation of the SEC rule requiring fund orders to be received by 4 p.m. Powell and Sta. Ana were also accused of engaging in "next-day bust orders," where they carried out trade orders for customers but then asked the clearing firm to cancel the trade the next morning if it didn't result in profits to the client.
The SEC barred Powell and Sta. Ana from association with any broker, dealer or investment advisor but took into consideration their cooperation with the investigation.