March 16, 2008

A.G. Edwards & Sons Stockbrokers Ordered to Pay $750,000 Fine for Market-Timing Scam

Three A.G. Edwards & Sons Inc. brokers are being ordered to pay $750,000 in fines for their participation in a market-timing scheme that involved mutual funds that benefited certain customers.

The brokers, Thomas Bridge, James Edge, and Jeffrey Robles, were also ordered to serve suspensions from the securities industries. Bridge, a former registered representative in the firm’s Boca Raton, Florida office, must also disgorge $39,808.53. Edge was the branch manager at the same office. Robles worked as a branch manager at Edwards’ Back Bay office.

Securities and Exchange Commission Chief Administrative Law Judge Brenda Murray ordered the sanctions. The market-timing scam occurred from the Edwards’ branch offices in Lake Worth, Boca Raton, and Boston.

According to the ALJ, Bridge participated in market timing to benefit a customer, while Edge failed to properly supervise Bridge—despite notices from mutual funds that Bridge was in violation of certain policies.

The ALJ is also accusing Bridge of market-timing in secret—concealing transactions by using several broker ID numbers and account numbers.

Robles failed to properly supervise Charles Sacco, who is accused of engaging in market timing for two hedge fund customers. Sacco has already settled the SEC charges against him.

Edwards also has settled SEC supervisory charges-related to the market-timing scheme. The firm agreed to pay $3.86 million in civil penalties, fines, and disgorgement, as well as hire an independent consultant.

Broker misconduct of any kind is wrong—especially when it negatively affects the money of investors. The law firm of Shepherd Smith and Edwards is dedicated to fighting for investors who do lose money from this type of misconduct and helping them recover their losses.


Related Web Resources:

Read the SEC Order (PDF)

Boca brokers fined in trading scheme, Miami Herald, March 15, 2008

Boca Brokers Suspended, Fined in Fraud, Black Enterprise, March 15, 2008


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Posted In: A G Edwards , Market Timing

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June 24, 2007

Do Wall Street Powerhouses Earn Billions Through Fraudulent Fund Sweeps?

Merrill Lynch, Morgan Stanley, Smith Barney and Charles Schwab are being sued for claims they improperly directed their clients's funds into lower paying deposit accounts at affiliate banks, enabling those banks to reap billions in extra profits. Attorneys for investors seek permission to add Wachovia, based on "sweep" accounts it will receive from AG Edwards in an impending merger.

Details of the suit, filed in January but amended last month, had not previously been reported. Bank deposit sweep programs “put the broker in a very conflicted position” said an attorney for the investors recently, adding “this is not what they should be doing as financial advisers.”

The claim states that the firms are positioning themselves as objective financial advisers, but send their customers' funds into bank deposits paying far less than market rates, adding that the firms disclose to clients that more profitable accounts are available, but bury the disclosures in documents while failing to mention the magnitude of their profits.

Merrill’s savings bank, for example, holds $55 billion in deposits from Merrill’s customers, plus other assets, and earned over $2 billion last year, confirms Jon Holtaway, managing director of Danielson Associates Inc., a bank consulting firm in Rockville, Maryland. He added that Merrill earns a net interest margin of 3.6% - 6 to 7 times as much as the 0.5% to 0.6% firms make on money merket funds.

The suit claims that most of the firms' banks initially paid interest rates competitive with money market funds, but changed to a "tiered" rate structure with yields of 1% or less to smaller customers. Morgan Stanley rolled out its program in 2005, with deposits growing by 30 times to $16.4 billion by February 2007, according to company reports.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.

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Posted In: A G Edwards , Merrill Lynch , Morgan Stanley , Wachovia

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May 31, 2007

Wachovia Brokerage Buying A.G. Edwards to Become Second Only to Merrill Lynch

Wachovia Corporation agreed to acquire A.G. Edwards Corporation for $6.8 billion in stock. This will vault Wachovia into the second-largest U.S. retail brokerage, behind only Merrill Lynch, with $1.1 trillion in client assets.

This transaction is the largest of the recent takeovers of regional brokerage firms, which are having difficulty fending off hiring of their representatives. Falling commissions in the industry has caused disruptions in sales staffs.

For years there has been speculation over whether A.G. Edwards, a mostly employee owned firm, could maintain its independence and raises new speculation about other large regional brokerages like Raymond James.

The deal will cause Wachovia to surpass Citigroup's Smith Barney brokerage unit in number of representatives as well as Ameriprise Financial, which claimed to be third. Wachovia said the combined company will have 15,000 financial advisers and an increased presence in 48 of the 50 largest metropolitan areas.

Wachovia has built its brokerage business relatively quickly, largely through the acquisition of Prudential Securities in 2003, and several smaller firms. Prudential Financial Inc. continues to own 38% of Wachovia.

By purchasing A. G. Edwards Wachovia will not only have a larger base to market financial products, but it will nearly double its number of brokerage offices to 1,512. The acquisition of A. G. Edwards will also increase Wachovia's focus on small investors and give it wider geographic coverage, particularly the Midwest.

A question yet unanswered is whether, with disparities in payout, Wachovia can retain both the A. G. Edwards Brokers as well as its own. Merrill Lynch retained a much smaller number of brokers than expected it bought Advest in December 2005. UBSAG saw an exodus of brokers from Piper Jaffray’s advisory business, which the Swiss bank last year.

Wachovia and its rivals, including Bank of America Corp., are eager to take aim at baby boomers, tens of millions of whom will take control of their retirement assets in the next decade. Wachovia also advertises its services to women and young people.

Shepherd Smith and Edwards represents investors in the recovery of their losses. We have handled many claims against both Wachovia and A. G. Edwards. Our expertise is also valuable to clients seeking to recover from investment firms after mergers, since such claims have unique problems concerning party entity, supervisory changes and documentation. If you or your company has sustained significant investment losses, contact Shepherd Smith and Edwards to schedule a free conficential consultation with one of our attorneys.

Posted by Shepherd Smith & Edwards | | Email This Post

Posted In: A G Edwards , Broker-Dealers , Wachovia

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