Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, March 21, 2007

Fair Funds Distribution to Mutual Funds Harmed by Veras Market-Timing

The Securities and Exchange Commission today announced the distribution of approximately $38 million in Fair Funds to approximately 810 mutual funds that were victims of fraudulent market timing and late trading by the Veras hedge funds. The funds distributed reflect the entirety of the disgorgement and civil penalties paid by the Veras hedge funds and their principals to settle charges of unlawful market timing and late trading brought by the SEC.
On Dec. 22, 2005, the SEC brought settled administrative proceedings against the Veras Capital Master Fund, VEY Partners Master Fund, Veras Investment Partners, LLC, Kevin D. Larson, and James R. McBride for their participation in a fraudulent market timing and late trading scheme. Respondents consented to entry of the settlement order without admitting or denying the SEC's findings. The settlement order found that from January 2002 through September 2003, respondents used deceptive techniques to continue market timing in mutual funds that previously had detected and restricted, or that otherwise would not have permitted, the Veras hedge funds' trading. The settlement order also found that respondents traded mutual fund shares after 4:00 pm Eastern Time and received the same day's price, and that, by virtue of their conduct, respondents caused violations of and willfully violated and aided and abetted violations of the antifraud and mutual fund pricing provisions of the federal securities laws.

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