SEC files fraud charges against former Prudential brokers in Boston

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The Securities and Exchange Commission announced Nov. 4 a civil fraud action against five brokers and one branch manager formerly employed by Prudential Securities Inc., in connection with their market timing trades in numerous mutual funds. |ret||ret||tab|

According to an SEC news release, the SEC alleges in its complaint that, from at least 2001 through September 2003, former brokers Martin J. Druffner, Justin F. Ficken, Skifter Ajro, John S. Peffer, and Marc J. Bilotti defrauded mutual funds and their shareholders by misrepresenting their identities or the identities of their customers in connection with thousands of market timing trades after the mutual funds had restricted or blocked the defendants or their customers from further trading.|ret||ret||tab|

According to the SEC's complaint, former branch manager Robert Shannon substantially assisted the brokers in their violations by, among other things, approving their market timing trades. Until September 2003, the defendants worked at a Prudential Securities branch in Boston.|ret||ret||tab|

According to the SEC's complaint, filed in federal district court in Boston, from at least 2001 through September 2003, numerous mutual fund companies blocked the defendants or their brokerage customers from further trading in their funds after the mutual fund companies detected market-timing activity by the defendants. |ret||ret||tab|

The complaint alleges that, to evade these blocks, the defendants concealed their own identities by using multiple broker identification numbers or concealed the identities of their brokerage customers by establishing additional brokerage accounts at Prudential Securities on behalf of the customers.|ret||ret||tab|

Stephen M. Cutler, director of the SEC Division of Enforcement, said: "Our complaint alleges that by concealing or misrepresenting their own identities or the identities of their clients, the defendants were able to circumvent restrictions intended to protect mutual fund shareholders against excessive market timing. That's fraud, plain and simple."|ret||ret||tab|

The SEC's complaint alleges that Druffner, Ficken, Ajro, Peffer and Bilotti violated Section 17(a) of the Securities Act of 1933 and violated or aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.|ret||ret||tab|

The complaint alleges that Shannon aided and abetted his co-defendants' violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC is seeking injunctive relief, disgorgement, penalties, and such equitable relief, as the court deems appropriate. |ret||ret||tab|

The SEC's investigation is continuing.|ret||ret||tab|

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