The US Securities and Exchange Commission (SEC) said yesterday that two units of the Canadian Imperial Bank of Commerce (CIBC) will pay $125 million (€102.8 million) to settle an SEC action alleging they were involved in "deceptive market timing and late trading of mutual funds".
The CIBC brokerage and financing units will repay $100 million in ill-gotten gains and $25 million in penalties, the SEC said.
The SEC said the CIBC units helped hedge fund customers with financing used to trade mutual fund shares improperly, both by illegal after hours trading and by questionable market timing exploiting pricing inefficiencies. It said the CIBC units were also involved in financing for hedge fund customers that violated margin and credit extension requirements.
SEC director Mark Schonfeld said that certain swap transactions done by one of the CIBC units "were little more than sham loans designed to evade the margin regulations".
The SEC said money paid in the settlement will be distributed to mutual funds and shareholders "harmed as a result of market timing and late trading" facilitated by the CIBC units.
