Security Trust Could Face Criminal Charges
New York Atty. Gen. Eliot Spitzer expects to take action against Phoenix-based Security Trust Co., which provides custody and settlement services to retirement plans, as part of his investigation into improper trade practices, according to sources familiar with the matter.
Spitzer’s office also may take either civil or criminal action against former STC Chief Executive Grant Seeger, the sources said.
STC declined to comment directly on whether charges were expected to be filed but said its lawyers were expected to meet with Spitzer’s team this week.
Seeger, who resigned Oct. 6, was not immediately available for comment.
An action against STC would mark the first time regulators have gone after the third parties that process trade orders made by participants of pension and other retirement plans. The move would be significant because the legal obligations that trustees and third-party administrators have in relation to securities trading are much grayer than for the mutual funds and brokerages.
STC, which administers $13 billion of retirement and pension assets for 2,500 plans, was alleged to have helped Canary Capital Partners, a New Jersey hedge fund, make illegal after-market mutual fund trades. Canary agreed to pay $40 million to settle its portion of Spitzer’s probe.