Former brokers at Prudential Securities who face charges that they made millions in improper trades had plenty of outside help, Massachusetts regulators say.<\/p>\n
A complaint being filed today, a copy of which was obtained by the Herald, claims sales representatives at several unnamed mutual fund firms encouraged the abusive trades.<\/p>\n
Sales representatives at the unnamed fund firms coached the brokers on how to avoid detection through tactics including bogus identification numbers and names, the complaint says.<\/p>\n
Charges are being filed today against three ex-Prudential brokers and two former managers, but a source familiar with Secretary of State William Galvin’s investigation says it isn’t over.<\/p>\n
Galvin’s office sent subpoenas last month to employees at Fidelity Investments, Morgan Stanley and Franklin Resources Inc.<\/p>\n
Today’s complaint describes how the brokers in Boston made millions of dollars from 1998 to 2003 by “market-timing” for clients – including hedge funds Chronos Asset Management and Head Start.<\/p>\n
Martin Druffner led the group, which included Justin Ficken and Skifter Ajro, and became the top producer for the Boston office, the complaint says.<\/p>\n
It also claims former Boston branch managers Michael Vanin and Robert Shannon, who took over for Vanin in November 2001, encouraged the trades, which helped generate revenue for the Boston office.<\/p>\n
Galvin and the Securities and Exchange Commission are expected to file fraud charges against Prudential later this month. Galvin’s complaint claims executives at Prudential Securities – a part of Wachovia Securities since July – were aware of the market-timing and didn’t try to stop the practice. For example, they received many letters from mutual fund firms warning about the brokers’ activities.<\/p>\n
The complaint also says Prudential didn’t have controls in place that would prevent illegal after-hours trading of funds.<\/p>\n
The SEC is also expected to file fraud charges against former Prudential employees today. But it was unclear yesterday whether the SEC would name the same people.<\/p>\n
Representatives for the SEC and for Galvin declined to comment.<\/p>\n
Galvin seeks to fine the five former Prudential employees and revoke their trading licenses.<\/p>\n
All the defendants, except Vanin, were among a group of employees forced out in September amid the probes.<\/p>\n
Representatives for Wachovia Corp., the majority owner of Wachovia Securities, and Prudential Financial Inc., a minority shareholder, declined to comment.<\/p>\n
Gary Crossen, a lawyer for Vanin, said the trading practices in question were “approved at the highest levels of the company.”<\/p>\n
Steven Fuller, a lawyer for Shannon, said his client acted consistently with Prudential policies.<\/p>\n
Daniel M. Rabinovitz, who represents the three brokers, said his clients will be vindicated.<\/p>\n","protected":false},"excerpt":{"rendered":"
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