Updated from 9:55 a.m. EDT

The

Bank of America

(BAC) - Get Report

employees involved in the mutual fund trading scandal are beginning to leave the nation's third-largest bank either by choice or by force.

A source at Banc of America Securities, the firm's securities division, said Thursday that Theodore Sihpol, the broker who allegedly played a central role in the scandal, is "no longer with" the company. The person didn't say when Sihpol left.

Additionally,

The Wall Street Journal

reported that BofA has fired Charles Bryceland, a branch manager for Banc of America Securities and one of Sihpol's supervisors. Robert Stickler, a spokesman for the Charlotte-based bank, wouldn't comment on the report.

Bryceland's broker registration statement, which is maintained by the National Association of Securities Dealers, shows that he is no longer employed by any Wall Street firm. In fact, the registration statement shows he stopped working at BofA in March. A source said Bryceland had briefly returned to work at BAC but confirmed he is no longer with the bank.

The registration statement also reveals that two of Bryceland's customers filed an arbitration claim against him in August 2002, claiming he permitted "excessive trading'' in their investment account and failed to supervise his subordinates. The arbitration, which is still pending, seeks $3 million in damages.

Sources at the bank said the company intended to move swiftly in firing some of the bank officials identified in the civil complaint filed by New York Attorney General Eliot Spitzer in the mutual fund investigation. The other two BofA officials whose names are mentioned in the complaint are Robert Gordon, co-president of Banc of America Capital Management, and Richard DeMartini, head of BofA's asset management division. Both are believed to still be with the bank.

Spitzer's office has alleged that BofA's Nations Funds mutual fund business, along with

Janus

(JNS)

,

Bank One

(ONE) - Get Report

and

Strong

, engaged in illegal trading activity in mutual fund shares with

Canary Capital Partners

, a New Jersey hedge fund.

Of the four fund families, Nations Funds comes off looking the worst in the Spitzer investigation. Brokers in the bank's Nations Funds unit are accused of helping a hedge fund purchase shares in a mutual fund after the close of the trading, but at their 4 p.m. EDT price. This is a practice called "late trading," and it's an absolute no-no in the industry.

All four funds are alleged to have permitted Canary Capital Partners to engage in market timing, an arbitrage strategy that allows savvy traders to take advantage of the time differences between the closing of the U.S. markets and foreign exchanges. While the kind of fast, in-and-out trading that market timers engage in is legal, most mutual funds try to discourage it because it can dilute the value of a fund by incurring unnecessary trading costs.

The Spitzer investigation, meanwhile, has sparked a broader inquiry into the mutual fund business by the

Securities and Exchange Commission

and a variety of other state regulatory agencies. In the past few days, regulators from Massachusetts and the SEC have begun to subpoena information about the trading activity in Prudential Securities' mutual fund business.

Prudential Securities is now part of a joint venture between

Prudential Financial

(PRU) - Get Report

and

Wachovia Bank

(WB) - Get Report

.