Prudential Securities' former Boston branch manager Robert Shannon has been told by Massachusetts regulators that he will be charged today for failing to supervise brokers allegedly involved in improper mutual fund trades, his lawyer, Steven Fuller, said.
"We've been informed that a complaint is going to be issued on Monday," said Fuller. "Mr. Shannon will defend the proceeding vigorously. As a supervisor, his job is to implement the policies and procedures of the firm as the firm dictates them and that is exactly what he did."
Massachusetts Secretary of the Commonwealth William Galvin plans to charge as many as six former Prudential brokers from the Boston office in connection with improper short-term trades, Business Week Online and the Boston Globe reported.
Shannon referred all questions to his attorney. Galvin didn't return a phone message left at his home Saturday morning. Matthew Nestor, Massachusetts' chief of securities enforcement, declined to comment when reached at home.
The charges come amid a broadening probe of trading practices at mutual fund companies, brokerages and hedge funds that threatens to undermine investor confidence in the US$7 trillion mutual fund industry.
Putnam Investments, the fifth-biggest US mutual fund company, this week became the first company to be charged as a result of the investigation. The Boston-based firm, Merrill Lynch & Co, Alliance Capital Management Holding LP and Bank of America Corp are among companies that have fired or suspended a total of more than 30 employees over fund trading.
Galvin has said some Prudential Securities brokers traded in and out of mutual funds for quick profits at the expense of long-term investors. He plans to charge that the ex-brokers created investment accounts at Prudential with different names and numbers to disguise market-timed mutual fund trades made on behalf of large investors such as hedge funds, Business Week said.
Prudential Securities became part of Wachovia Securities on July 1, when life insurer Prudential Financial Inc sold it to Wachovia Corp in a cashless transaction. Prudential Financial kept a 38 percent stake in the combined brokerage.
The Securities and Exchange Commission, NASD and New York Attorney General Eliot Spitzer have also requested information on mutual fund trading from Prudential Financial, the company said in a regulatory filing in September. Prudential Financial has said it was cooperating with all inquiries.
Shannon and five Prudential Securities brokers in Boston were fired in September after Galvin's allegations. The brokers were Martin Druffner, Justin Ficken, Marc Bilotti, John Peffer and Skifter Ajro, their attorney, Michael Collora, said on Oct. 1.
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