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Security Trust CEO Resigns Amid Probe

October 07, 2003|From Reuters

The mutual fund industry probe by New York Atty. Gen. Eliot Spitzer apparently cost another executive his job Monday: Phoenix-based Security Trust Co., one of the companies implicated in Spitzer's investigation, said Chief Executive Grant D. Seeger resigned.

Separately, Fidelity Investments, the largest U.S. fund firm, said that it had received a subpoena from Spitzer and that it was cooperating with the probe.

A number of other major fund companies have reported receiving subpoenas, which are requests for information and don't imply wrongdoing.

Security Trust, which administers $13 billion in retirement and pension assets in 2,500 plans, did not say why Seeger stepped down. A call to his home for comment wasn't returned.

In a court complaint filed Sept. 3, Spitzer said Security Trust helped one of its clients, hedge fund Canary Capital Management, trade hundreds of mutual funds as late as 9 p.m. Eastern time but at 4 p.m. prices. By law, fund trades entered after 4 p.m. are supposed to be priced at the next day's closing price.

Spitzer also said Canary had struck deals with four fund companies -- Bank of America Corp., Bank One Corp., Janus Capital Group and Strong Capital Management -- to engage in market timing trades that may have hurt average investors. None of the fund companies has been charged with wrongdoing, nor has Security Trust.

Security Trust spokeswoman Nancy Murphy said an independent firm, which she declined to name, on Sept. 23 began investigating Canary's trades as well as Security Trust's practices.

Security Trust said Seeger had been replaced by Thomas Plumb, who most recently was CEO for PlanAnalytics Inc., a Minnesota-based consultant for financial advisors.

A number of financial firms have suspended or dismissed executives and brokers in recent weeks after examining their fund trading practices. On Friday, for example, Fred Alger Management Inc. said it had suspended three employees.

Boston-based Fidelity said Monday that it received a subpoena from Spitzer last week. "We will fully cooperate with all of the attorney general's requests," spokeswoman Anne Crowley said. She said Fidelity had long-standing, self-enforced policies against market timing and late trading.

The subpoena could be an attempt to determine whether intermediaries such as brokers or banks might have tried to time Fidelity funds without the company's knowledge, said Jack Bowers, editor of the independent Fidelity Monitor newsletter.

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