Two top brokers at Florida's Geek Securities have pleaded guilty in one of the first criminal prosecutions involving allegations of mutual fund market timing.

The guilty pleas from Geek Securities President Katuilya "Tony" Sharma and broker Neal Wadhwa come a month after federal prosecutors charged the pair for their role in a scheme to arrange abusive mutual fund trades for several unnamed hedge fund customers. The defendants also had been charged with engaging in late trading.

Both men could face up to five years in prison, in addition to a significant fine.

Market-timing, or frequent trading of mutual fund shares, is technically legal. But the Securities and Exchange Commission and federal prosecutors have filed fraud charges against market-timers and their brokers when there's evidence that a high degree of deception was used to mask the abusive trading activity.

Late trading, meanwhile, is the flatly illegal practice in which someone buys shares of a mutual fund after their 4 p.m. closing price in order to take advantage of late-breaking, market-moving news.

Sharma and Wadhwa are the second group of brokers targeted by federal prosecutors in the nearly yearlong investigation into improper trading in the mutual fund industry. In March, federal prosecutors in New York filed criminal charges against the three top brokerage executives at Mutuals.com for allegedly establishing a deceptive system to permit hedge funds to market-time shares of mutual funds.

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