U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19647 / April 10, 2006
Securities and Exchange Commission v. Thomas J. Gerbasio, et al, Civil Action No. 05 1833 (E.D. Pa.)
Civil and Administrative Proceedings Resolved as to Thomas J. Gerbasio in Market Timing Fraud Matter
The Securities and Exchange Commission ("Commission") announced today that it has resolved all of its pending litigation with Thomas J. Gerbasio ("Gerbasio"). On March 30, 2006, the Honorable J. William Ditter, Jr., United States District Court Judge, signed a Final Judgment permanently enjoining Gerbasio from violations of antifraud provisions of the federal securities laws (the "Final Judgment"). Securities and Exchange Commission v. Thomas J. Gerbasio, et al., Civil Action No. 05-1833 (E.D. Pa.). Gerbasio consented to the Final Judgment without admitting or denying the allegations of the Commission's complaint, except as to jurisdiction.
In the civil injunctive action filed by the Commission on April 21, 2005, the Commission alleges that from August 2002 until April 2004, Gerbasio was in charge of a New York office of Fiserv Securities, Inc. that placed tens of thousands of market timing trades for certain hedge fund customers. The complaint alleges that, from at least August 2002 until October 2003, Gerbasio defrauded hundreds of mutual funds and their shareholders by engaging in deceptive market timing practices for two hedge fund customers, with the result that thousands of market timing trades were placed that would otherwise have been rejected by the fund companies. Specifically, the Complaint alleges that Gerbasio employed a variety of deceptions on behalf of the hedge fund customers, including misrepresenting the nature of their trades to the funds, opening dozens of accounts under different names to conceal the customers' identities from the funds, entering trades in amounts designed to avoid the funds' detection triggers, trading in funds less likely to detect the market timing, and advising the customers on strategies to conceal their market timing from funds that objected to and/or prohibited this trading.
Under the Final Judgment, Gerbasio is permanently enjoined from violations of Section 10(b) of Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Final Judgment orders Gerbasio to pay disgorgement together with prejudgment interest in the amount of $540,044, but waives payment of all but $100,000, and does not impose a civil penalty, based on Gerbasio's sworn financial statements submitted to the Commission.
The Commission also announced today that on April 10, 2006, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions barring Gerbasio from association with any broker or dealer, which is based on the permanent injunction contained in the Final Judgment.