MetLife Subsidiary Paying $3.3 Million

The Securities and Exchange Commission on Thursday announced the settlement with General American, which is a subsidiary of MetLife Inc., one of the nation's largest insurance and financial-services companies.

In addition, William Thater, a former senior vice president of St. Louis-based General American, agreed to pay fines and restitution totaling $163,137 for allegedly enabling the late-trading scheme.

Thater, 52, who lives in Danbury, Conn., also will be barred for three years from working for any brokerage firm or investment adviser.

The SEC said Thater signed a written agreement with the family that gave its members exclusive late-trading privileges in mutual funds underpinning life insurance policies that the family bought from General American for around $20 million. The agency did not identify the family, which has not been charged with any violations.

General American and Thater neither admitted nor denied wrongdoing in the settlement with the SEC but did agree to refrain from any future violations of securities laws. The money from the fines and restitution will go to compensate the affected mutual funds.

Attorneys representing General American couldn't immediately be reached for comment. Thater's attorney, Dan Purdom, said his client "has cooperated completely with the SEC and is glad to have the matter behind him."

The settlement was the latest enforcement action over alleged mutual-fund trading abuses in an industrywide crackdown that began nearly four years ago.

Late trading involves favored customers receiving the market-closing price for mutual fund shares for orders placed after the stock market closes for the day at 4 p.m. ET.

That can give the customers an information advantage over other fund investors, allowing them to trade based on news that breaks after the markets close that could affect the value of the fund's holdings. It is prohibited by the SEC and securities-industry rules to ensure that all fund investors are on the same footing.

The SEC said that from February through November of 2002, the favored family submitted, confirmed or canceled 79 requests for mutual fund trades after 4 p.m. ET.

As a result of the family's late trading, the value of the funds was reduced by around $3.3 million, according to the agency. It said some employees of General American were aware of the written agreement between the family and Thater, and of the late trading, but failed to take action to stop it.

"By permitting a wealthy family to late-trade, William Thater elevated the interests of a few select individuals over other investors," SEC Enforcement Director Linda Thomsen said in a statement.

Variable annuities are often described as mutual funds wrapped in an insurance policy. They are contracts between an investor and the company selling it in which the company agrees to make periodic payments to the investor, beginning immediately or at some future date. Sold through brokerage firms and insurance agencies, their periodic payouts change depending on the performance of the underlying mutual funds, bonds or other investments.