A state judge said yesterday he would let larceny charges stand against a former Bank of America broker who was accused of illegally profiting...

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NEW YORK — A state judge said yesterday he would let larceny charges stand against a former Bank of America broker who was accused of illegally profiting by late trading.

Theodore Sihpol III has been accused in a 40-count indictment of stealing more than $1 million from each of six mutual funds by arranging for clients to get the day’s closing price even though their trade orders were placed after the 4 p.m. market close.

Normally, investors who place after-hours trades to buy funds would have to pay the next day’s closing price, losing out on gains that had accrued since the close of business.

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Sihpol, arrested Sept. 16, has pleaded not guilty and is scheduled to go on trial April 26. He is free on $750,000 bail. Grand larceny, the top charge against him, carries a penalty of up to 25 years in prison. The other charges are punishable by up to four years each.

State Supreme Court Justice James Yates said yesterday that a federal Securities and Exchange Commission (SEC) rule that was the basis of the indictment “did not, by its terms, prohibit placement of trade orders after 4 p.m. EST.”

The defense argued that the SEC rule coupled with customary practices in the industry and a single line in a fund’s prospectus requiring orders by 4 p.m. were insufficient to alert Sihpol that “mere facilitation of trades after 4 p.m. would become the object of criminal prosecution.”

While Yates said he saw some merit to that argument, he allowed the case to go to trial because of grand-jury testimony that the trades would not have been accepted, or would not have been accepted at the price offered, if the true timing had been known.

The judge also cited testimony that there were concerted attempts to help traders hide the true timing of the trades. That alone, if proved at trial, would constitute a scheme to defraud and a violation of the state’s business law, Yates said.

The judge also said he agreed with the defense that the amount the defendant allegedly wrongfully obtained should be the net amount gained through the trade. The prosecution argued that the “wrongful taking” was the entire amount of the trade, as well as anything else the seller might have lost because of the misrepresentation.

Yates said that argument rests on a factual dispute: Prosecutors claim that they can show that no trade would have occurred but for the alleged fraud, while the defense said the trade would have occurred but at a different price. The judge said he would let a jury decide.

The indictment alleges Sihpol stole more than $1 million each from the Nations Funds Trust, which is associated with Bank of America; PIMCO Funds; MFS Family of Funds; Janus Investment Fund; Fred Alger Fund and RS Investment Trust.