Nicholas-Applegate Capital Management has paid a $250,000 penalty to the SEC to settle a complaint of illegal trading by former senior trader Timothy J. Lyons.
The SEC continues to pursue Mr. Lyons for almost $1 million, plus interest and other penalties. He denies, through his lawyer, any wrongdoing.
The SEC complaint centers on Mr. Lyons' activities between 1991 and July 1993 as portfolio manager and trader for Nicholas-Applegate's own profit-sharing plan. Mr. Lyons didn't manage other assets at the firm, although he did so at Lyons Capital Partners, a now-defunct firm 70% owned by Mr. Lyons.
The SEC alleges Mr. Lyons directed orders to the profit-sharing plan to see if the trade was profitable. If it was, he allocated it to his personal account and didn't report the action to Nicholas-Applegate's back office, the SEC complaint states. If the trade was unprofitable, he would allocate it to the employee plan and report it to the back office, according to the complaint.
The SEC charged Mr. Lyons with fraudulently allocating $929,601 in profitable equity day trades to his personal accounts and $416,238 in unprofitable day trades to his clients' accounts.
Bobby Cabral, Nicholas-Applegate's compliance officer, never identified any of these violations, the SEC documents state.
Nicholas-Applegate President Art Nicholas said he didn't believe there was collusion between Mr. Lyons and Mr. Cabral, who later worked at Lyons Capital.
``We had a senior person we'd known a long time, but there was an isolated situation. We offered him an open environment and he took advantage of the people he was sitting next to,'' Mr. Nicholas said of Mr. Lyons.