The US Securities and Exchange Commission is upholding the market timing violations against two AG Edwards and Sons Inc. supervisors and one of its stockbrokers. Billions of dollars were involved in the mutual fund market timing transactions.
While market timing, which involves the buying and selling of mutual fund shares in a manner that takes advantage of price inefficiencies, is not illegal, a violation of 1934 Securities Exchange Act Section 10(b) and Rule 10b-5. can arise when there is intent to deceive.
Last year, the ALJ found that AG Edwards and Sons brokers Charles Sacco and Thomas Bridge intentionally violated antifraud provisions when they engaged in market timing activities even though they had been restricted from doing so. The ALJ also found that supervisors Jeffrey Robles and James Edge failed to properly supervise the stockbrokers.
The antifraud charges filed against Bridge by the SEC Enforcement Division involved 1,352 trades (representing $1.126 billion) he executed over a two-year period for companies belonging to client Martin Oliner. The Enforcement Division accused Sacco of entering 25,533 market timing trades (representing $4.036 billion) for two hedge fund clients between 5/02 – 9/03.
The SEC determined that Edge, who was Bridge’s supervisor, knew and was complicit in the latter’s actions. Although Robles was not considered to have been complicit in Sacco’s alleged broker fraud, the commission said he should have noticed there were problems.
The SEC ordered Bridge to cease and desist from future violations. He is also barred from associating with any dealers or brokers for five years. Sacco has already settled his broker-fraud case.
Edge is barred from acting in a supervisory role over any dealer or broker for five years. Robles received a similar bar lasting three years. All three men were ordered to pay penalties, while Bridge was ordered to disgorge almost $39,000 plus $16,665.57 in prejudgment interest.
Related Web Resources:
Read the SEC’s Opinion regarding this matter
Commission Sanctions Thomas C. Bridge for Violations of the Antifraud Provisions of the Securities Laws and James D. Edge and Jeffrey K. Robles for Failing to Supervise Reasonably, Trading Markets, September 29, 2009
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