Brokerage fires 12 in probe of fund deals

Market-timing trades broke Prudential's rules

October 02, 2003|By BLOOMBERG NEWS

Prudential Securities fired a dozen brokers and managers in its Boston and New York offices after regulators alleged that some brokers traded mutual funds for quick profits at the expense of long-term investors, people familiar with the situation said.

The Boston employees included Robert Shannon, manager of the office, and five brokers, Martin Druffner, Justin Ficken, Marc Bilotti, John Peffer and Skifter Ajro, their lawyers said.

Prudential, part of Wachovia Securities, also dismissed six employees in two offices on Long Island and in Manhattan, a person familiar with the matter said.

Prudential was the fourth company to fire or suspend employees since New York Attorney General Eliot Spitzer started a probe last month of the $6.9 trillion mutual fund business.

He has accused companies including Bank of America Corp. of giving New Jersey hedge fund Canary Capital Partners LLC improper trading advantages in exchange for investing in their funds.

William F. Galvin, the Massachusetts secretary of the commonwealth, alleged last month that Prudential brokers in Boston violated securities laws by making short-term trades in mutual funds for some customers at the expense of long-term investors.

Spitzer, the National Association of Securities Dealers and the Securities and Exchange Commission also are investigating Prudential, the company has said.

Prudential Securities became part of Wachovia Securities on July 1, when life insurer Prudential Financial Inc. sold it to Wachovia Corp. in a cashless transaction, keeping a 38 percent stake in the combined brokerage. The new entity has 12,000 brokers in 700 offices and 330 bank branches.

Shannon's lawyer, Steven Fuller, said his client had no comment. Michael Collora, the lawyer representing the five Boston brokers, said his clients are cooperating with the SEC and Galvin's office.

They were asked to resign because of a disagreement over whether they followed the company's policy requiring that any restrictions on the timing of trades listed in an individual funds prospectus must be followed, he said.

Tony Mattera, a spokesman for Wachovia Securities, confirmed that there had been some departures.

Bank of America has dismissed at least five employees since Spitzer filed his initial complaint Sept. 3.

Janus Capital Group Inc., which was also accused of giving Canary special trading privileges, said yesterday that it earned $1 million by allowing some investors to make short-term trades. The company said certain employees who were "central" to the trading agreements are no longer there.

Alliance Capital Management LP, a New York unit of France's AXA SA, has also suspended or fired employees over the matter.

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