Ex-stockbroker to pay $153m

Former Las Vegas stockbroker Daniel Calugar agreed to pay $153 million to settle charges he illegally traded mutual funds, the largest penalty imposed on an individual by US regulators in their three-year probe of the fund industry.

Calugar, 51, former head of Security Brokerage Inc., will surrender $103 million in gains and be fined $50 million, the Securities and Exchange Commission said yesterday. He previously paid $72 million to end a class-action suit.

Calugar earned $175 million from fraudulent trading, more than any other investor charged by regulators, according to civil charges filed by the SEC in 2003. He cheated other fund shareholders by buying and selling fund shares after the 4 p.m. market close in New York, which is illegal, and making rapid trades, a practice most companies said they prohibited, the SEC alleged.

Calugar bought and sold funds managed by Alliance Capital Management Holding LP, MFS Investment Management, Franklin Resources Inc., and Bank of America Corp.'s Columbia Management Group, regulators alleged. Each company has settled trading cases with regulators, who have won more than $3.9 billion in penalties.

The proposed deal with Calugar needs approval by US District Judge Robert Jones. Calugar will be permanently barred from any association with a securities brokerage.

Calugar and his former firm, now known as Symphonic Alpha LLC, did not admit or deny wrongdoing. Calugar's lawyer didn't immediately return a phone call seeking comment.

Late trading and market timing seek to profit from the fact that mutual funds are valued once a day, while the securities they own trade more often. Orders submitted after 4 p.m. New York time are executed at the next day's price to prevent fund buyers from profiting from potentially market-moving events after the close. Market timing involves buying a fund's shares and then quickly selling them, which can raise a fund's transaction costs and reduce gains for long-term holders.

Calugar was the biggest market timer at New York-based Alliance, the SEC said. His relationship with the company began in April 2001, when the firm started to allow him to make frequent trades in its mutual funds in exchange for keeping ''sticky assets" in its hedge funds, the SEC alleged. About $64 million of his profit came from rapid trades in the company's technology funds, the agency claimed. Calugar made a ''sticky asset" offer to MFS of Boston and was rebuffed, the SEC said. Still, Calugar was able to market time the company's funds, the SEC alleged.

Calugar started trading with Franklin in 2001, in an arrangement contingent on Calugar's investing in a new hedge fund, Massachusetts Secretary of the Commonwealth William Galvin alleged in September 2004.

The SEC and Spitzer accused Boston-based Columbia of permitting nine investors, including Calugar, to make $2.5 billion in rapid trades between 1998 and 2003.

Alliance settled for $600 million in fines and foregone management fees in December 2003. MFS agreed to $351 million in fines and lost fees in February 2004.

Bank of America paid a total of $675 million over claims including the trades by Calugar.