Oct. 29–The chief of Wachovia Securities’ brokerage group stepped down yesterday, amid regulatory inquiries into his role in the market-timing scandal at Prudential Securities, which merged withWachovia in July.
Michael J. Rice, 37, well known on Wall Street for running Prudential’s brokerage operation, announced internally that he was leaving the firm, after championing the combination with Wachovia only a few months ago.
He is taking a post at his former parent company, insurer Prudential Financial Inc., spokesman Jim Gorman said, as a senior managing director “working on Prudential Securities legacy issues.”
Newark-based Prudential has a 38 percent stake in the combined brokerage. Prudential and Wachovia spokesmen said Rice had made a “personal decision” to leave the brokerage, in part because he did not want to move to Wachovia’s Richmond headquarters.
But two lawyers involved in the investigation of Prudential’s mutual fund market-timing activity in Boston and New York said Wachovia had asked Rice to leave.
Rice has received a subpoena from the Securities and Exchange Commission, said a regulator working on the case, and other regulators say they plan to interview him.
Many big names in the investment business have been snared in the market timing investigations, including Putnam Investments in Boston, Janus Capital Group Inc. in Denver, and Bank of America Corp.’s NationsFunds in Charlotte, N.C.
In many of these cases, regulators are focusing not only on brokers or portfolio managers who timed funds to put money in their own pockets, but on the senior executives who permitted the abuses to take place.
A month ago, 10 Prudential Securities stockbrokers in Boston and New York, and two managers, were asked to resign as a result of heavy market timing in funds. The firm is under investigation by the SEC, the Massachusetts Securities Division, the National Association of Securities Dealers, and New York Attorney General Eliot Spitzer. In his complaint, Spitzer named a New York hedge fund, Canary Capital Partners, and provided evidence that top executives at Janus and Bank of America had permitted improper trading.
Lehman Brothers bank analyst Jason Goldberg said Wachovia is looking to steer clear of the problems plaguing Prudential. Of Rice, he said, “To the extent that this guy is tainted, it looks like they’re trying to deflect any attention away from the new Wachovia Securities and keep it at Prudential.”
James Donley, formerly head of Wachovia’s Atlantic Coast region, will succeed Rice, a spokesman said.
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